With accounts payable outsourcing, businesses can take advantage of high-level expertise to maintain positive supplier relationships, ensure invoices are paid in a timely manner and support internal auditing and reconciliations. Hiring a freelance professional benefits businesses that don’t need a full-time employee and want to better manage their growing business or supplement their team.
The Role of the Accounts Payable Function
The primary role of accounts payable is to manage outgoing payments from a business to other organizations and suppliers. An accounts payable professional, typically a bookkeeper or accountant, performs the following:
- Maintains relationships with suppliers
- Ensures the timely tracking, processing and payment of a company’s debts
- Assists in developing a payment schedule to maximize cash flow
- Liaises with suppliers to reconcile any overpayments
- Requests extensions for due dates
- Centralizes a business’s incoming payment requests
Why an Accounts Payable Professional Is Important to Your Business
Small businesses may question the importance of having an accounts payable (AP) department. When a company is relatively small, the volume of invoices can seem manageable, however, as a company grows and volume increases, it becomes more difficult to stay on top of invoices without proper management practices in place.
An AP professional provides a multitude of benefits for your business by:
- Improving the relationship between your business and its vital suppliers and creditors by eliminating missed or late payments.
- Maintaining cash balances in conjunction with accounts receivable to monitor and manage cash flow and ensure longevity.
- Obtaining favorable terms and negotiating special discounts from suppliers.
- Developing contingency plans in the event that a supplier demands immediate payment or cash flow is interrupted by unexpected costs, like equipment failure or spikes in prices from suppliers.
- Providing an accurate accounting of the cost of goods bought and sold for a business by way of a three-way match, which compares a purchase order, shipment receipt and supplier invoice for discrepancies.
- Assist in creating financial reports and communicating the results or recommendation to improve cash flow.
How Does Accounts Payable Outsourcing Work?
When a company chooses a third-party accounts payable solution, it is often through the services of a software, an accounting firm or through a remote, freelance accountant or bookkeeper for business. In the latter cases, a remote professional performs the necessary tasks on a flexible basis at an hourly rate, and this scope of work can be adjusted as business needs change.
In addition to accounts payable, fractional talent can also help you with other a la carte services, including accounts receivable or payroll, depending on your needs.
The Benefits of Outsourcing
Outsourcing accounts payable is more than a means for freeing up time. The support of a remote expert has additional benefits as well:
- An outside expert can help segregate duties with other finance team members to help prevent fraud.
- A dedicated expert can prevent your business from losing vital suppliers due to missed or unpaid bills.
- You have access to a qualified professional at a significantly lower cost than hiring a full-time, in-house employee.
- An experienced bookkeeper or accountant can improve and automate processes to help you make better decisions, faster.
- Your business can get the support it needs as you scale without having to commit to a hire.
- Businesses do not have to train or go through costly onboarding as a seasoned professional can typically get the ball rolling right away.
Is It Right for Your Business?
Businesses with growing transaction volume can especially benefit from the expertise of a fractional bookkeeper or accountant. As the business grows and talent is stretched thin, the finance department runs the risk of missed, late or inaccurate payment, which can cost the business in the short and long term. A flexible solution can bring the business up to speed as it scales without a full-time commitment.
If your business is prone to supply chain issues and other situations impacted by payables, someone with industry experience can use their expertise to make the right recommendations, troubleshoot issues, manage relationships and save your business more money.
Considerations and Potential Pitfalls to Avoid
Outsourcing accounts payable doesn’t have to be a guessing game. Encourage the best outcomes by setting up your service provider for success. You can avoid issues with data security or performance quality by vetting your service provider and having a thoughtful onboarding process.
Follow these tips to get the most from your expert:
- Look for a professional with previous experience, including knowledge in your particular industry.
- Give your professional access only to the data and systems they need to complete their work and make sure that access is terminated once the relationship ends.
- Provide your expert with current SOPs or processes so they have context into current issues or can maintain continuity.
- Make your needs, timelines, deadlines and expectations clear from the very beginning, including your desired cadence for check-ins and communication.
How to Get Payables Support for Your Business
Companies that implement proper accounts payable practices early on enjoy better visibility on their cash flow tracking and improved relationships with suppliers and vendors. In the growth stage, it’s hard to justify the addition of another full-time employee, and this is where a remote expert can fill the gap.
Paro offers a full suite of outsourced bookkeeping and accounting solutions, including accounts payable, to solve your problems and drive growth. Our highly vetted fractional experts bring the right mix of skills and credentials to give your business confidence in its numbers.
