What is Accounts Payable Outsourcing?
Accounts payable outsourcing is a business practice that involves using a third-party vendor to manage processes related to invoices and bills. The services offered by these vendors can vary but generally include functions such as invoice capture, purchase order (PO) matching, processing payments, archiving records, and generating reports.
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While outsourcing can provide many benefits, it’s essential to weigh these against potential vulnerabilities based on your unique situation.
Most companies considering accounts payable outsourcing face one or more of the following challenges:
- Overwhelmed AP Team
It’s common for accounts payable departments to become overwhelmed by their workload, particularly during periods of rapid business growth when invoice volume increases. This can strain your AP staff, especially if they are relying on paper-based processes, manually entering data, chasing down approvals, and handling heavy PO-based tasks. Each additional invoice increases the workload and can reduce overall productivity. - High Invoice Processing Costs
As discussed in a previous blog post, manually processing a single invoice can cost up to £20+. If your workflow is inefficient—due to uncooperative vendors, excessive back-and-forth communications for invoice verification, or other issues—the costs can escalate quickly. Consequently, upper management may seek to explore all options for reducing these invoice processing costs, including outsourcing. - Lack of Controls in the AP Process
While mistakes are unavoidable in any manual process, duplicate payments can be costly. According to reports, approximately 0.1% to 0.05% of paid invoices are typically duplicates. Depending on the size of your business, this can lead to hundreds, thousands, or even millions of dollars lost due to these duplicate payments when proper controls are absent. Additionally, missed or late payments create extra work for your staff as they attempt to rectify errors, further decreasing the time available for other accounts payable functions. - Deteriorating Vendor Relationships
Vendor relations should be approached with a customer service mindset. Vendors may withdraw contracts if they encounter difficulties working with your business. Situations such as missed due dates or non-payments can lead vendors to contact the accounts payable department repeatedly for payment status, taking valuable time away from AP tasks. Any delays in payments can harm your relationship with vendors, who may resend invoices through various means, increasing the risk of duplicate payments. - Preference for Outsourcing Rather than Hiring More AP Staff
Financial leaders often worry about the overhead costs associated with hiring additional full-time employees. They may also lack the time to recruit new staff or have concerns about employee turnover. These factors can make outsourcing all or part of the accounts payable function an attractive alternative, even if it translates into another invoice.
Overall, assessing these issues can help in deciding whether accounts payable outsourcing is a suitable option for your organisation.
Efficiency isn’t just an advantage. It’s a necessity. Increasingly, businesses are outsourcing accounts payable (AP) to achieve it. Why AP? Because it’s a time-consuming, error-prone operation, but it’s also a crucial one.
Getting the most out of your accounts payable process can save you money, improve your supplier relationships and free up internal resources to focus on core strategies.
This article covers how accounts payable outsourcing services can transform your workflows and drive operational excellence across your business. We’ll look into top outsourcing services, what to think about before implementing them, and pitfalls to avoid.
Why businesses are turning to accounts payable outsourcing
Businesses outsource accounts payable for efficiency. Managing AP in-house can be time-consuming, prone to errors, and expensive. Outsourcing offers a streamlined alternative, allowing companies to leverage the expertise of third-party providers equipped with top-of-the-range automated tools and standardised processes. It’s a shift up from having your finance department labour over tired old manual processes.
With outsourced AP, you gain the highly professionalised eye of a specialist. They analyse your accounts and present data in ways that give you real-time visibility into the payables end of your financing, ensuring better cash flow management and stronger supplier relationships.
Through outsourcing a business can streamline operations, minimise the risk of errors or fraud with advanced technologies and best practices, aid scalability, staff fluctuations and more.
Outsourced AP also helps navigating complex compliance issues and regulatory requirements by putting them in the hands of people who make a living untangling red tape.
Another highly praised benefit is that outsourcing accounts payable reduces processing costs and cycle times.
How accounts payable outsourcing saves time and reduces costs
This is two-fold. By delegating invoice processing, payment scheduling, and vendor communication to a third party you free up your own staff. The time they used to spend crunching numbers can now be driven into saving you money, or making it.
Time and cash savings on your end are backed up by the service you’ll be getting from your outsourced AP. The company handling these processes for you should use advanced automation tools and established workflows that minimise manual errors, accelerate invoice approval cycles and ensure timely payments.
That means no more worries about late-payment fees, duplicate payments from manual errors will be reduced – Even the chance of fraudulent invoices slipping through your system is slashed to near zero.
Accenture
Accenture is a global leader among accounts payable companies. They offer robust AP solutions with automation, AI-driven insights, and seamless integration with ERP systems.
IBM
IBM leverages its AI platform, Watson, to deliver efficient and compliant AP solutions with a strong focus on automation, cloud integration and fraud prevention.
Capgemini
With deep experience in finance transformation, Capgemini delivers AP outsourcing that integrates well with enterprise systems and supports global compliance requirements.
Genpact
Known for its digital-first approach, Genpact provides intelligent AP services using machine learning, real-time analytics and scalable workflows for businesses of all sizes.
Infosys BPM
Infosys Business Process Management offers agile and customisable AP services, including real-time reporting, automation, and strong vendor management capabilities.
What to expect from accounts payable processing services
When considering accounts payable (AP) outsourcing, it’s crucial to explore solutions that align with your needs. Here’s what you want and what you want to avoid.
Core features to look for
Effective AP outsourcing solutions go beyond simply handling payments – they use high-end tech to streamline the entire accounts payable process. Key features of these solutions include:
- Invoice capture and OCR
- 2/3-way matching
- Vendor portal integration
- Approval workflows and automation
- Real-time dashboards and reporting
- Fraud detection and compliance tools
Automated invoice capture with OCR (Optical Character Recognition): This technology automatically scans and captures key data from invoices, eliminating the need for manual data entry. OCR helps improve accuracy and processing speed, reducing the risk of human error and freeing up valuable staff time.
2-Way and 3-Way matching: This key feature of invoice processing software ensures that the details on an invoice match purchase orders (PO) and receipts. With 2-way matching, the invoice is checked against the PO, while 3-way matching also includes the goods receipt, ensuring all parts of the transaction align before payment is made. This minimises the chances of overpayments or fraud.
Vendor portal integration: Many AP outsourcing solutions offer a vendor self-service portal, allowing suppliers to submit invoices and track payment status. This not only improves communication and relationships with vendors but also reduces the workload for your internal team, as they don’t have to manually chase down missing invoices or answer vendor inquiries.
Customisable approval workflows: These solutions provide the flexibility to tailor approval processes according to your company’s specific needs. Approvals can be set at various stages (e.g., for different departments or levels of authority), helping ensure compliance and smooth processing while reducing bottlenecks.
Real-time reporting and dashboards: Even though you’ve outsourced your AP, you’ll still want to see what’s going on with your finances. Outsourcing should give you real-time insights into your AP operations. This feature allows businesses to track payment status, view outstanding invoices, monitor cash flow, and identify trends that can help optimise cash management and forecasting.
Together, these tools help businesses reduce manual tasks, improve operational efficiency, minimise errors, and increase visibility into their financial processes. These essential tasks allow companies to enhance cash flow management, avoid payment delays, and maintain stronger financial controls.
Red flags
- Lack of transparency
- Limited integration
- Poor customer support or inflexible service models
On the flip side, avoid solutions that lack transparency, don’t support integration, or offer limited customisation. The right AP outsourcing solution not only streamlines operations but should also just make your life – or the lives of your finance teams – easier.
Should you outsource your AP function? What to consider
Ultimately, making the decision to outsource AP requires thorough cost-benefit analysis and risk assessment. When chewing this over your top priority will likely be cost savings, but don’t just go for the money.
Outsourcing AP is about more than cost savings. Improved efficiency and access to expertise can be valuable too, so make sure to factor that in.
Consider the complexity and volume of your transactions, the reliability and reputation of potential vendors and how outsourcing aligns with your overall business strategy. Data security, compliance, and integration with your current systems are also vital concerns.
We’ve often told people it’s worth evaluating the potential loss of internal control versus the benefits of automation and scalability. So, think about where your business is now and where it’s heading.
Outsourcing is not a one-size-fits-all type job. You need to make it fit with your business needs and the constraints of the business landscape.
Comparing AP services providers: what sets the best apart
The best stand out through a combination of advanced technology, scalability, and strong customer support. Top accounts payable outsourcing companies will offer automation tools that streamline invoice processing, ensure compliance and reduce errors. Bonus points if their platforms integrate easily with your existing business systems and provide real-time reporting and analytics.
Security and data protection are paramount, you don’t want to invite a data breach. Leading providers will also deliver flexible, customisable solutions tailored to your business and should be backed by responsive, knowledgeable support teams.
As with most services, a proven track record goes a long way. Check out client testimonials – both positive and negative – to help distinguish the best in the field.
Martin Peirce
Founder and CEO
Is accounts payable outsourcing right for your business?
Determining if AP outsourcing is right for your business depends on your operational needs, growth plans, and resource capacity. If your AP process is time-consuming, error-prone or struggling to scale, outsourcing can offer cost-effective solutions through automation, expert support, and improved compliance.
It’s ideal for businesses seeking to reduce overhead, increase efficiency, and focus internal teams on strategic tasks. However, consider data security, vendor reliability, and the ability to integrate with your existing systems.
A thorough analysis of the advantages of outsourcing accounts payable against the costs, risks, and long-term benefits will help you decide if AP outsourcing aligns with your business goals. Consider what accounts payable services you might need. Where do your weaknesses lie and what can be done to fix them?
A word from Zahara
So, how do we know all this? We’ve been building, selling and perfecting accounts payable automation software for a long time. We don’t handle outsourcing, but we do provide the kind of technology the company you outsource from should be using: the automated stuff.
This isn’t a hard sell – we hope you’ve found our blog useful – but if you’ve got to the bottom and not made up your mind, you could consider automating. It brings you most, if not all, of the benefits of outsourcing and could be a solid alternative if you’re not ready to take the leap.
If you’d like to know more you can read about it here. You could also book a free demo or schedule a call with one of our experts. We’d love to hear from you.
FAQS
If your AP team is overloaded, struggling with late payments, or using outdated manual systems, outsourcing may be the right move. It’s also ideal for growing businesses needing scalability or tighter financial controls.
Yes, reputable AP outsourcing providers prioritise security. Look for vendors that comply with international data security standards (like ISO 27001 or SOC 2) and offer features like encryption, access controls, and audit trails.
No. Good providers offer real-time dashboards and detailed reporting. You remain in control of approvals and payment authorisations while benefiting from expert support and increased transparency.
Absolutely. Automation software like Zahara provides many of the same benefits – like invoice scanning, approval workflows, and real-time reporting – without handing over control to a third party. It’s a great option if you’re not ready to outsource.
