Pros & Cons Of Outsourcing Your Accounts Payable
Updated: Apr 28
It is quite common for a number of businesses to outsource their accounts payable (AP).
It’s a tempting move because of the huge time-saving benefit it offers. Although outsourcing may seem like a smart and easy decision, it also comes with its drawbacks.
We’ve put together a comprehensive pro and con list to give you all the information you need to know before deciding whether this is a viable option for you.
Let’s dive right in.
What is Accounts Payable Outsourcing?
AP outsourcing is the term used when you hire a third party to manage the AP tasks for your business.
AP are the expenses incurred by a business to pay for goods and services received from its suppliers. If you’re an entrepreneur, it may seem like a daunting task to keep track of all your AP invoices. But there are many benefits to outsourcing this function – the biggest being saving time and money.
The Pros of Outsourcing Accounts Payable Processes
Manual data-entry tasks can be a complete headache for busy business owners.
Here are a few of the main advantages of handing these tasks over to an outsourced provider.
Outsourcing your AP processes can save you heaps of cash. By outsourcing, you won’t have to employ someone full-time to manage this process.
Instead, you can outsource them to a virtual assistant or freelancer who will do the work on a per-project basis. This means that they’ll charge less than if they were hired as a regular employee.
You also won’t have any payroll taxes to worry about with contractors.
Another major benefit of outsourcing your AP processes is that you won’t need to spend precious man-hours completing AP tasks; Instead, you can delegate them and can focus on other aspects of your business.
Access Their Resources
When you outsource your AP duties, the team you outsource to will be fully set up with all the resources they need for the job. This means you won’t have to worry about acquiring any new tools for your business.
Outsourcing isn’t only for accessing new skills, you’ll also get access to all of the AP resources you need. This makes it easy to automate AP processes and access advanced software without needing to acquire these yourself.
Outsourcing your AP gives you access to stronger security. Since you won’t be handling sensitive information yourself, you won’t need to worry about losing it. And since you’ll be using third-party vendors to complete these tasks, you won’t need to worry about any AP security breaches within your organization.
However, you need to be sure of the outsourced provider’s security measures. We’ll cover this later on.
Accounting System Integration
Outsourcing AP gives you the ability to easily upgrade your accounting system. If you’ve been wanting to update your accounting processes, handing it over to a third party is a simple way to achieve this.
The outsourced AP team can help you introduce new AP processes and integrate this with a whole new accounting system.
You won’t need to worry about spending time implementing the new system, your outsourced help will do it for you.
The Cons of Outsourcing Your Accounts Payables
Unfortunately, there is a downside to outsourcing your AP. Here are some of the main disadvantages of taking this approach.
Lack of Control
While outsourcing your AP functions can give you a lot of advantages, it does mean giving up control over certain aspects of your company.
You won’t be monitoring your accounts as carefully. This means you won’t always know what’s happening with your AP processes, and you just have to trust that things are being taken care of properly. An outsourced AP team could damage relationships with your vendors or miss an invoice, and you might not even know about it.
Giving up control to someone else means less work for you, but it also means losing out on carefully monitoring the AP process.
When you outsource your AP, you have to hand over your data to a third party. The outsourced AP team now stores all of your data on their servers, which can be a risky move for some businesses.
Handing over responsibility to a third party is highly beneficial in many ways. The downside is that you’ll be relying on the company to handle your AP duties properly.
This is a core function of your business, and if they make any mistakes, there’s very little that you can do to fix them.
You’ll need to make sure that the team you trust with your AP tasks is completely dependable.
While outsourcing may seem like a good idea for busy SMEs, there’s another solution that doesn’t involve the same level of risk.
AP automation can take care of all your time-consuming data entry jobs accurately and efficiently. With the right tool, you’ll be able to save hours of accounting tasks without having to give up the control to a third party. Basically, you get all the time-saving benefits without having to outsource your AP.
Sweep's app can be integrated into a SMEs accounting system to automate all AP entries. This is an effortless way to ensure your accounting stays on track. You won’t miss any entries, and you won’t have to worry about the risks involved with outsourcing.
This means you can focus on your business while your AP runs on autopilot.
Outsourcing your AP to a third party can be highly beneficial for your business, or can be a complete waste of time and money if you don't use the right vendor and don’t do a proper handover.
With a tool like Sweep, small businesses and startups can optimize their AP process with minimal effort.
This allows you to keep AP responsibilities within your organization, while still saving time and money. If you’re worried about outsourcing your accounts payable, then using an app like Sweep is the smartest solution.