Accounts Payable Outsourcing

Accounts Payable refers to the money that a firm owes to its vendors or suppliers for goods and services that have been bought but not yet paid for. This includes all unpaid bills, invoices, and other liabilities owed by a company to its creditors.

Outsourcing accounts payable is the practice of delegating the management of the accounts payable process to a third-party service provider. This service provider is responsible for processing and paying invoices, managing vendor relationships, providing reports and analytics on accounts payable data.

Process of Account Payable Services

The process of accounts payable services typically involves the following steps:

1. Invoice receipt: The first step in the accounts payable process is receiving the invoice from the vendor. This can be done via mail.

2. Verification: The invoice is then verified to ensure that it is accurate, matches the purchase order and/or contract, and meets any other relevant requirements. Any discrepancies are addressed and resolved.

3. Approval: Once the invoice is verified, it needs to be approved for payment. This involves ensuring that the payment is authorized, and that the payment amount is within budget and is in line with any other relevant policies and procedures.

4. Recording: The approved invoice is then recorded in the accounting system, with all relevant details such as vendor name, invoice number, payment amount, and payment due date.

5. Payment: Once the invoice is recorded, the payment can be processed. This involves creating a payment file and sending it to the appropriate payment method, such as a bank or payment processor. The payment is then released to the vendor on the payment due date.

6. Reconciliation: After the payment is made, the accounts payable department reconciles the payment with the vendor's account, ensuring that the payment was received and applied correctly.

7. Reporting: Regular reports are generated to provide insights into accounts payable performance, such as payment history, outstanding balances, and vendor performance. This information can help inform decision-making and improve overall financial operations.

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Benefits of Outsourcing Accounts Payable Services

1. Cost savings: By entrusting accounts payable responsibilities to external partners, businesses can effectively reduce expenses associated with vendor management and invoice processing. Service providers can capitalise on economies of scale to optimise costs and improve operational efficiency.

2. Improved accuracy: Leveraging external expertise for accounts payable can lead to enhanced precision in invoice processing and payment procedures. Service providers possess specialised knowledge and advanced technologies to automate processes, minimising the risk of errors and delays.

3. Increased efficiency: Partnering with external firms for accounts payable tasks enables businesses to streamline internal operations and allocate resources more strategically. This can result in improved cash flow and reduced processing times for invoices and vendor payments.

4. Better vendor relationships: Collaboration with external partners for accounts payable fosters stronger and more reliable relationships with vendors. Timely payments and consistent communication demonstrate reliability and professionalism, ultimately strengthening trust and rapport with suppliers.

5. Access to analytics and reporting: Outsourcing accounts payable functions provides businesses with valuable insights into financial performance, vendor interactions, and expenditure trends. Access to comprehensive analytics facilitates data-driven decision-making, empowering businesses to optimise processes and drive growth.

Outsourced accounts payable services can streamline your payables by providing a dedicated team of experts to manage the entire accounts payable process, from invoice receipt to payment. This can help reduce processing times, improve accuracy, and build better vendor relationships, ultimately improving your overall financial operations.