Accounts Payable: Automate or Outsource?

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• Digitizing AP

Are you struggling with your Accounts Payable? Do you find yourself spending hours every month making sure your company pays the bills on-time? Would you rather be doing something else?

Manual data entry and inefficient processes can cost a company a fortune. Invoices also have to be routed for approval. In the end, it is time-consuming and expensive. It may also introduce an inability to approve invoices in time to capture early payment discounts. The advice given most businesses is to outsource, or hire another company, to handle any function that is not a core competency, such as marketing or accounting, but outsourcing accounts payable isn’t for everyone. Some companies will find more benefit in automating their accounts payable. AP automation means that the company’s bills are paid automatically.

The question is: should you automate or outsource your accounts payable?

Benefits of AP Automation

AP automation simplifies each invoice so that the same information is readily available on each one, ensures ready access, guarantees on-time payment, and reduces data from each invoice into meaningful numbers, such as cost per piece. Budgets can be tracked more easily as well, helping to avoid overruns. Much like automatic payments in personal finance, accounts payable automation allows a business to keep AP processes in-house, while gathering a wealth of data that can be used to track where the money really goes.

Automation isn’t for Everyone

While using accounts payable software to automate the payments your company makes to its vendors has a variety of benefits, there are still good reasons why your business may want to avoid automating AP. For one, accounts payable is necessary to your business, but it doesn’t contribute to the way the company differentiates itself, its products, or its service offerings. Accounts payable software can also be a big cost, albeit a tax-deductible one. Putting that much money into software is a commitment and some companies, especially smaller ones, may not be ready for that.

When Outsourcing is Better

Sometimes outsourcing AP is the better choice. It allows a company to avoid the cost of adopting accounts payable software, the time it takes to train staff to be able to use such a system efficiently, and the burden of using its resources on managing its payables. In addition, accounts payable is transactional by nature, so it makes far more sense to outsource that business function than a more subjective one, such as marketing. Outsourcing also means a company can prevent errors and discrepancies.

Outsourcing is not Always the Best Option

Outsourcing accounts payable can help most businesses manage the mess that comes from payment and cost management, but it isn’t right for every company. The problem is that outsourcing can fragment a company, with each of these segments operating as its own little business, with its own goals, own set of rules, and own culture. In addition, you also have to consider whether outsourcing can offer the same wealth of data you would get from automating accounts payable.

There is no easy answer in deciding whether you should automate or outsource your accounts payable, as the right choice is different for every business.