Outsourced Accounts Payable Services

Accounts Payable is a short-term current liability within the general ledger and balance sheet reflecting the amount owed to creditors for the goods/services procured from suppliers/vendors without paying upfront cash (on credit). The amount must be paid within 12 months as it is a short-term current liability to avoid payment default.

The number of days a business takes to make the payment to the supplier is known as Days Payable Outsourcing (DPO).

Yes, you can outsource accounts payable to third-party Accounts Payable Outsourcing Providers. Its chief benefit is a significant reduction and savings in operating and overhead costs of up to 50%. It has become a primary aspect for businesses to outsource Accounts Payable Services.

Also, it enables businesses to hire highly qualified and experienced accountants with extensive expertise and skillsets at arbitrage savings of workforce cost to broaden their service portfolio and capture a substantial portion of the competitive local business market.

There are numerous ways to process accounts payable. The following is the ideal process:

1. Order placement for goods/services and generation of a Purchase Order (PO)
2. After receiving the order, the business takes receipt of it to create a receiving report. The accountant tallies the purchase with the PO to verify that all the ordered items are received.
3. After confirmation, the vendor/supplier generates the final invoice, and the business performs a 3-way matching between the final invoice, receiving the report, and PO.
4. And lastly, the payment is disbursed after the approval and the cycle is completed.

There are several benefits of Accounts Payable Outsourcing, which businesses consider to take their operations to newer heights. The following are the salient benefits:

• Expanding your firm scale by hiring seasoned accountants and leveraging the infrastructure and resources of third-party instead of deploying them in-house
• Cash in numerous projects during seasonal months without worrying about staffing new workforce and get ongoing projects-specific tasks completed in a shorter turnaround time
• Get relief from Accounts Receivables activities and utilize the saved time in other core business areas and strategy formulation.
• Outsourcing accounts payables gives your clients highly professional and exceptional customer support service.
• Record the invoices and bills systematically and enhance the firm’s goodwill by timely payments to vendors and suppliers.
• Access the dashboards and dynamic reports for in-depth analysis and profound insights.

The four core functions of accounts payable are:

1. Invoice Processing – Receiving and Processing of Invoices from Vendors and Suppliers
2. Payment Processing – Obtaining Timely approval for issuing payments to Vendors and Suppliers
3. Records Keeping – Recording Invoices and Issuance of Payment against their respective Vendor ID, line items, and date in the General Ledger
4. Vendor Management – Building healthy and long-term business relations with Vendors and Suppliers by promptly resolving their queries, mitigating unnecessary delays, settling conflicts, negotiating discounts, and proficiently handling all escalations

The primary objectives of Accounts Payable Processing are optimizing working capital, enhancing compliance, boosting labor productivity, and driving cost avoidance by mitigating duplication, incentivizing discounts, and eliminating penalties. Accounts Payables ensures that suppliers and vendors are issued payment timely for the received goods and services to improve business relations.

The four core steps in the accounts payable cycle are:

• Receiving Purchase Order and Invoice
• Matching the Purchase Order with Invoice to check whether goods/services are received
• Recording the transactions and getting timely approval for Invoice
• Payment Disbursal to Vendors and Suppliers after approval and recording in the balance sheet

Getting along with the dynamic business world trends and changes is vital for every company to sustain itself in the market. Every firm operates primarily to earn profits and drive in more revenues. 

For maximizing net profits, it is crucial to reduce unnecessary expenditures and eliminate the costs that have lucrative substitutes. You can attain significant savings of up to 50% on operational and overhead costs by outsourcing accounts payable. 

It is essential for every business operating in today’s era to outsource their accounts payable activities to a third-party service provider to worry-free expand their operation in the future without deploying capital for new space, recruiting workforce, and other elements. 

You can seamlessly attain scalability by broadening your service offering basket and enriching your expertise by leveraging the resources and technology of an outsourced firm. 

Most importantly, you will get error-free and 100% accurate reports, enhancing your cash flows, streamlining workflows, and timely payments to vendors and suppliers.