Accounts payable automation vs outsourcing - Which is the best?
When companies are thinking of ways to reduce the cost of processing their accounts payable, two major methods come to mind.
They can either outsource the process to specialist agencies or firms to do it for them or they can automate a lot of the process using SaaS tools that are available online.
Whether you should outsource accounts payable or use accounts payable automation tools will depend on what your priorities are and what your organization needs the most.
Both methods will have some pros and cons depending on your requirements and you will have to weigh them accordingly to make the right decision.
If you are outsourcing accounts payable or planning to automate it using a tool, both options will help you save costs to some degree.
On one hand, outsourcing accounts payable will help you get it done at a much lower cost than hiring a separate employee.
But on the other hand, automating your AP process using a digital system will further decrease your costs as you will not have to hire extra accountants and only pay a small SaaS fee to use the tool.
When you choose to outsource accounts payable process compared to keeping it in-house, one drawback you will face from it is being able to control the process.
The service provider will not be able to help you all the time whenever you need it as they have to work for many clients like your business.
So if having control over your processes and how the accounts payables task is executed is important to you, then using an accounts payable automation tool is always better.
Similar to not having a lot of control if you outsource your AP, you will also not be able to constantly communicate with them if you require something specific.
On the contrary, if you have an in-house AP member along with an automation tool, your queries and requests will be solved much faster.
Quick communication is essential for businesses to make better decisions and in this case, using an automation system instead of outsourcing accounts payable helps you do that.
Both methods improve the efficiency of processing invoices. Outsourcing it to a firm ensures that your invoices are being processed by professionals who are extremely skilled at AP processing.
At the same time, using an automation tool also makes processes faster with automatic data capture and invoice matching systems. Choosing the right option in such a situation becomes a matter of convenience and preference.
Once you decide to outsource your AP processes, you will be completely dependent on the service provider. This can be negative in some cases where there might be issues on the service provider’s end that affect your business.
But when you use accounts payable automation tools, you always have the option to fall back on your team internally as all the data is available to you immediately.
When you outsource accounts payable to a service provider, one thing that you give up is the visibility of invoices, what their status is, which ones have been paid, which ones are being processed, etc.
At least when you automate your AP process using a tool in-house, you still maintain visibility over all payments and can set up internal approval systems and controls for better AP management.
Intentional or unintentional, you might come across errors in invoices when processing them. If these errors go unnoticed they can cost the company a lot.
This aspect is a flip of a coin as both options have equal chances of error detection and resolution. Although, there might be chances of errors slipping more often from service providers because they have to process a large volume of invoices from many clients every day.
The flexibility to make an invoice payment early to receive an early payment discount is only present when you process your AP payment internally using the help of an automation tool.
When you outsource AP, the service provider will only make sure that the invoices are made on time before or on the due date.
This is because they will have their own set of processes to complete tasks and will most likely not adhere to small iterations for you.
When it comes to insights, both an automation tool and a service provider will be able to give you insights regarding your expenses. But depending on the contract you have with your service provider, this may or may not be included in the service.
Accounts payable automation tools on the other hand come built-in with analytics tools and reporting capabilities to give you deep insights into how your company budget is being spent.
The choice of whether you should outsource accounts payable or automate it depends on your goals and priorities.
But when automating has so many benefits over outsourcing accounts payable, it is hard to see why a company would outsource its AP.
Volopay is an all-in-one expense management software that allows you to automate accounts payable.
The platform allows you to easily create vendor accounts be it an individual or corporate entity and store their details on the platform so you can make payments easily without having to enter their details each time you process an invoice.
Thanks to our multi-currency wallet which has 60+ currencies from over 100 countries, you can make both domestic and international payments without having to pay hefty FX fees.
The platform also enables you to schedule payments in advance and create recurring payments so that you never miss out on paying invoices and have to deal with late payments.