In the finance industry, accounting outsourcing is seen as a way to optimize and improve overall business performance. A survey report by Canon Business Process Services entitled “The Case of Outsourcing Accounts Payable” reaffirms this belief as it notes that the accounts payable (AP) function is the most frequently outsourced process within Finance & Accounting.
Outsourcing your accounts payable (AP) processes, when done right and with the right outsourcing partner, is a strategic move to aims to improve the overall efficiency and performance of your organization. Service level agreements (SLAs) between business process outsourcing providers (BPOs) and financial institutions keep both parties on track as well as in clear understanding and agreement on services, priorities and responsibilities. Michael Alfonsi, BancTec’s vice president, wrote how good SLAs establish good foundations between BPOs and financial companies as the goal of SLAs is to have the right targets to achieve the organization’s specific business objectives.
The key to effective outsourcing is to identify which AP processes you can outsource and which ones you prefer to keep in-house. Here we list three effective, common ways to take advantage of accounts payable outsourcing:
Lighten your load off front-end AP processes.
There are usually three categories of AP-related tasks: repetitive, value-added, and specialized. Repetitive tasks include data entry, mail sorting, and filing. These generally do not require special skills or knowledge, but take up a huge chunk of time-extensive labor. These activities are usually your first priority when it comes to outsourcing.
Another example of these front-end activities involves receiving invoices and converting them to a format readable for entry to an enterprise resource planning (ERP) or accounting system. Organizations usually don’t have the advanced data extraction technology needed for this process, and even if organizations decided to invest on automated data capture, such equipment would need continuous monitoring without being cost-efficient, making it a burden for small to mid-sized companies. Outsourcing companies can provide SLAs that guarantee accuracy and quick turnaround times.
Deploy your systems faster.
Outsourced AP processes are usually delivered and accessed via web browser (Software as a Service models – SaaS), allowing organizations to deploy automated improvements to the system faster and less expensively as compared to installing software that needs integration with their current ERPs. SaaS solutions also update automatically without the need for new software upgrades, or the help of IT resource staff.
Take advantage of technology without investing on it
A majority of survey respondents do not actually want to buy AP automation technology. They see it as cost-prohibitive, with the need for continuous monitoring and an eventual need for upgrades. Outsourcing AP automation technology solves this challenge. Outsourcing providers are responsible for the maintenance, availability and upgrades of various AP automation solutions.
Account payables are oftentimes viewed as a necessary business cost and is often least prioritized when it comes to improvement investments. However, AP functions that are deemed least risky and least prioritized actually have the greatest saving potential in your business. Imagine how much money you can save by automating manually intensive and time-consuming AP activities without having to invest necessarily and heavily on automation technology.
Accounts Payable Outsourcing: Take Advantage of Cost, Control and Complexity
Scott Alexander, NextProcess president said, “An AP outsourcing provider should be able to provide tools, training, and technology to increase control.” Though a misconception of outsourcing is relinquishing control to a third party provider, Alexander sees it as a way to have more control over an organization’s operations.
By entrusting processes to an outsourcing provider, as agreed upon with clearly set service level agreements, you are increasing your business operation efficiencies and saving cost on resources, equipment and valuable time.