Last week we published the first part of this compendium of reasons why it is interesting to consider, or at least study, the outsourcing of AP tasks. There we discussed justifications such as cost optimization, process automation, the application of WorkFlow technologies and solutions, cost flexibility, and standardization.
Accounts Payable Outsourcing
In this post we will continue to put forward other reasons that can help in taking the decision in favour of the outsourcing of Accounts Payable .
- Outsourcer’s Ability.
The capacity of service providers has increased considerably thanks to important investments in technology and infrastructure that the principle providers have carried out with the objective of achieving more efficient processes with maximum security.
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Also, a specialised company has certain abilities and knowledge that does not exist in the majority of Accounts Payable departments, or exist but not to the level which they should. A good example of this is the recuperation auditing. Checking prior payments to discover the duplication of payments, or over-payment of invoices, and in this way recuperate money, requires a special ability that an AP department normally does not have. But even if it had this ability, it is probable that they do not have the time to carry out the task, or their time is better spent carrying out some other task. There are AP departments that are currently outsourcing recuperation tasks to specialised providers, who carry out the task, and who are not paid until the money is recuperated. Other examples include VAT recuperation, contract compliance, auditing and payment of complex shipping costs, telecommunications invoices,….. - Access to best practices.
Frequently outsourcing allows organisations to enjoy the benefits that come from employing the best practises in all AP functions. The principle service providers have developed specific platforms and methodologies to meet the requirements of different AP functions and areas, and for these reasons are better positioned to provide solutions to common AP problems. For example, if a Company is having problems in processing invoices due to issue related to AP procedures, the external provider can actively provide insight on how to solve the situation. This is because the external provider has a great deal of experience working with AP departments in other organisations in similar sectors with similar problems, which they have solved. - Reduction of labour costs.
The carrying out of certain tasks in another country (a process known as offshoring) can offer other specific benefits. The main driver for offshoring any organisations activity in G8 countries is the cost advantage offered by countries such as India, Philippines, Poland or Spain, where AP functions can be carried out at a significantly lower cost. The estimated saving can vary between 20% and 60% of local costs. Offshoring leads to a reduction in costs of the operation due to the reduction in AP department personnel, saving in training costs, and saving in related indirect costs. - Multi language Requirements.
Organizations have facilities all over the world, and so too are their AP departments. However, the service requirements in each region are different, and in many cases (like Europe) it is very important that the AP department interacts using the local language of its providers and employee. Organizations can still delocalize the execution of AP functions to places where the operations can be carried out in various languages. - 24h Operation.
First-level service providers for AP outsourcing are accustomed to working for global companies with multiple sites and should provide a 24 hour service to attend the processes in different time zones. This service availability helps prevent a backlog in incoming documents and in the availability of payment.
Conclusions
In spite of the cost reductions being a key factor in the taking of decisions regarding the outsourcing of the Accounts Payable process, there are hidden costs which are significant and should be considered. In this category, we can include the cost of the new infrastructure, provider selection, service management, legal advice, transitioning, training, change management… For this reason it is recommendable to carry out a careful analysis regarding the suitability or not of outsourcing the AP processes.
In all cases we have carried out an analysis prior to the decision being taken. Do you have any questions about outsourcing? Ask us
