Outsourcing has its advantages, the major being cost saving optimising resources using experts in the field and allowing freedom to concentrate on the core tasks of business expansion and revenue cycles rather than working within the business on non-core activities like managing finance, call centres, Catalog management or data entry processes. Accounts Payable is one such process which is an important part of the business but is considered a non-core activity, thus being outsourced by many firms. There are a number of Business Process Outsourcing Units that have come into the business and offer Accounts Payable Outsourcing as a solution thus relieving the Finance and Accounting of a certain burden and allowing for better cost control and efficiency management. Accounts Payable(AP) Services, in simple terms, refers to the process of keeping records due to creditors of the firm.
Many still believe, among the finance and accounting domain, that Accounts Payable Service, as an important process, should be controlled and processed internally, while on the other hand many are of the belief that outsourcing the same would help in operational efficiency and a non-core task should be outsourced as feasible. Let us look at the pros and cons of Accounts Payable services in the case of it being outsourced to an external BPO (Business Processing Unit)
PROS (advantages of outsourcing Accounts Payable Services)
This is perhaps the key factor that drives the forms to go in for Accounts Payable outsourcing. The cost of hiring a vendor to perform this activity is way lower compared to in-house employees. This alone reduces operational costs and is reason enough to consider not keeping this activity indigenous.
Access to better resources/ software
Quality trained staff only performing this activity for a number of customer firms allows you a better expert solution. The BPOs who are engaged in Accounts Payable services also have access to the latest in technology for an enhanced experience and reporting.
Increase efficiency and improvecash conversion cycle
The AP automation used would help increase the efficiency of the process including a better cash flow. A cash conversion cycle would help the firm establish if it is cash deprived for operations, and outsourcing the process helps tide over this difficult time with a specialised management in place.
Efficiency in document management
With an improved reporting structure and paying for what gets done in an outsourcing model, it is far easier to track document and have a better control over Accounts Payables. Here, you would not be worried about employee negligence as the BPO takes the responsibility for the same.
Sometimes it is harder to push employees and this leads to a lower efficiency of certain processes which is not the case when you hire a vendor to perform the activity for you. Reaching out to an AP BPO will help you improve your not-so-performing processes.
Better fraud control
The BPO being an outside firm is responsible for all actions and a fraud would be way harder to commit. Internal employees would have limited control, hence you are safeguarded against frauds.
Error control is way better
Unlike the case of in-house assets, an outsourced firm would have better checks and would focus on providing an error-free experience. This is a key advantage for outsourcing the process.
Document SOPs and procedures
This is only possible with updates and SOPs always being in checks like in the case of outsourcing because documenting procedure updates internally may not always be feasible.
CONS (disadvantages of outsourcing Accounts Payable Services)
The concerns for privacy would be a key decision when looking to outsource the Accounts Payable service to a third party service provider. Is it possible to rely on them completely?
What can you do? Carefully analysing the firm’s procedures including checks and audits should be a pre-requisite, so you can safeguard yourself against privacy invasions.
Transition to the newer process
This is always challenging as a task. When you outsource to an outside firm, the handover and transition are not always so easy. Employees may take time to get used to the new system as well.
To help figure a solution to this, look for automation via cloud computing and seek out companies with easier-to-use software.
Data security risk
Your concern about data security may be important here. Accessing data via internet and servers, you trust the third party to be reliable. Are you making the right decision?
Seek an experienced BPO to ensure you are in safe hands. Check on case studies and take testimonials and run some trials while you study their checks and balances and how they plan to keep your data safe.
Lack of control and customisations
You may also be concerned about the processes and how you can control them being thousands of miles away.
It is key to check if the BPO has a dedicated support system with real-time monitoring tools and how they would be reporting this. You would need to consider time zone differences, so it’s best to look for a 24x7 support provider.
Analysing the CONS and safeguarding yourself against them is key to the success of this model but the PROs far outweigh the concerns, as long as the Outsourced BPO is reliable and experienced. It is advantageous to outsource your non-core activity and focus on your business plans and vision.