What do you think is the impact of your relationship with your vendors and service providers when you constantly end up making a late payment? Think about it for a moment. The consequences are similar when your clients do it. It disrupts the cash flow, the vendors constantly chase for payments, and they might even refuse to continue to do business. More often than not, your clients may not even be doing it on purpose. As a business owner, there is so much we need to take care of. And staying on top of the game may be more difficult than we think. But as an accounting firm, solving the accounts payable (AP) problem may take up a significant amount of your time and energy, reducing the bandwidth to take care of more important things. Dealing with this time-consuming yet critical work can lead to errors, delays, and inefficiencies. Outsourcing accounts payable functions has become an effective solution to reduce these risks. It also offers an opportunity to help your clients reduce late payments and improve overall financial efficiency.
The unwillingness to pay is hardly ever the reason late payments occur. They can happen due to many reasons. This includes:
Manual errors
One of the most common reasons for missed payments is mistakes in invoices, purchase orders, and payment processes. This may lead to the teams being unaware of the fact that the payment has to be made.
As an accounting firm, you already have a lot of operational activities to take care of. When you are handling a high volume of transactions, leading to backlogs, the chances of delayed payments increase.
When teams fail to track payments properly, businesses may struggle to keep their heads above water, often leading to delayed payments.
There could be a lack of coordination between departments, such as the client servicing manager and finance. This can lead to a delay in making payment, and approvals, along with a lack of knowledge regarding where payments must be submitted.
There is no doubt that accounting firms already have too much on their plates and it is important to offload the time-consuming and resource-intensive processes to a team of experts. But outsourcing is not just about saving time, it comes with a range of benefits, including:
When you outsource, you bring on board a team of experts who can manage payment processes, ensuring all transactions are processed efficiently and on time.
Outsourcing can free up a significant amount of time for the in-house teams. When they get rid of these repetitive functions, you can focus on strategic activities like budgeting, forecasting, and growth initiatives, rather than transactional tasks.
Whether your business handles a few hundred or thousands of invoices a month, outsourced providers can help you achieve your scalability goals. It helps you with meeting your growing needs without sacrificing accuracy and speed.
Access to automation tools
Most outsourced providers use new-age tools and technologies that help streamline invoice processing, approval workflows, and payment scheduling, making the entire Accounts Payable process seamless.
A team of outsourcing AP experts can handle all aspects of invoice management—right from receiving the receipt to payment. This also reduces the chances of misplaced or overlooked invoices, which is one of the top causes of late payments. Centralizing all invoices through one system, the AP provider ensures every invoice is accounted for and paid on time.
Late payments can also happen when there are delays in approvals from the people who authorize them. Outsourced Accounts Payable services often use digital workflows, streamlining the approval process, and allowing faster authorizations. These tools also provide automated alerts and reminders to ensure that the key stakeholders do not miss their approval deadlines.
Many businesses miss out on early payment discounts due to inefficient payment processes. The right AP outsourced service team ensures that firms can take advantage of early payment opportunities, which leads to better cost savings and improved relationships with the suppliers.
Outsourcing your AP side of business helps ensure that you get real-time insights into your clients’ outstanding payments, upcoming liabilities, and available cash flow. This visibility allows better financial planning while ensuring that the payments are made on time without straining the cash reserves.
Invoice Processing Time
You can measure the time taken to process an invoice from receipt to payment. The shorter the processing time, the better its efficiency.
Payment Accuracy
You should also track the percentage of payments made without errors or adjustments. A high accuracy rate suggests that the AP process is well-managed.
Early Payment Discounts Captured
Monitor how often your company can take advantage of early payment discounts. This is indicative of the times when invoices have been processed early or on time.
Vendor Satisfaction
Regularly gathering feedback from suppliers can help ensure that they are satisfied with payment timeliness. High vendor satisfaction reflects a strong and on-point AP process.
Late Payment Penalties
Track the number and cost of late payment penalties to see if the outsourcing strategy is reducing these incidents.
While it is important to get a team of experts who understand the business processes impeccably, it is also important to analyze the effectiveness of the partnership. When you hire the right outsourcing partner, you no longer have to constantly stress over payment deadlines.
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