You’ve heard of accounts payable outsourcing and are curious as to what it entails; accounts payable and other bookkeeping are vital to your business, but they are also time-consuming.
Things would be a lot easier if these tasks were moved off your plate, but how does it work? Can it be trusted? Will it be expensive? Since accounts payable is such an important part of any business, rumors and myths follow. Here we’ll address these myths and sort them out with the facts so that you can decide what’s best for your business.
What Is Accounts Payable?
Let’s define what we’re talking about, accounts payable is the term used to describe what results from buying goods or services from suppliers on credit. Accounts payable is also sometimes known as trade payables. It is shown as a liability on a company’s balance sheet.
An accounts payable department reviews transactions between the company and its suppliers to make sure they are approved, processed, and paid. Processing includes entering relevant information into the company’s bookkeeping system.
What Is Accounts Payable Outsourcing?
Accounts payable outsourcing is the process of hiring a third party to electronically account for and process invoices, payments, and accounts payable between your business and its vendors and suppliers.
Instead of having an in-house accountant for whom you have to provide full hours and benefits, you can hire someone on the outside to do your financial processes and record-keeping for you. There are plenty of myths circulating around accounts payable outsourcing, but read on and you will find that the benefits far outweigh the risks.
Myth #1: Accounts Payable Outsourcing Is Not Secure
Outsourcing your financial department means handing over sensitive data to a third party. You would be outsourcing accounts payable, payroll, tax filing and management, financial reports, vendor invoices, and payments. Along with that comes your payment information and other sensitive financial data.
Naturally, rumors abound that this is a scenario ripe for fraud and scamming. Perhaps the third party will create bogus invoices that link in some way to their own accounts and charge you without your knowing. Perhaps they’ll sell your information. There’s a lot to be nervous about.
The truth: Outsourcing accounts payable can actually help reduce fraud. Many outsourced accountants are trained to detect fraud and potentially dangerous situations. A good accountant knows how to detect if something has been tampered with or faked. Rather than act as the scammers themselves, accountants can be your first line of defense in detecting and avoiding those who wish to cheat you out of hard-earned money.
What’s more, these outsourced accountants have the training to help you abide by global regulatory rules so that you can be sure to be operating legally, but without the time-consuming and expensive training needed to learn those regulations.
Myth #2: Outsourcing Is Expensive
Especially for small to medium-sized businesses and start-ups, there is not a lot of financial wiggle room. Can your business really afford to hire someone else to do something like take care of your accounts payable and payroll? Surely these highly-trained accountants come at quite the cost. It would be more financially expedient to do it all yourself.
The truth: Outsourcing your accounts payable department can actually save you a lot of money, whereas hiring someone in-house to do your finances includes costly paid time off, insurance, and payroll taxes. Hiring a third party skips all those expenses.
With a third party, you can pay hourly and only when you need work done. You don’t need to hire a full-time staff member, you can just outsource financial work at an hourly rate. This way, if there isn’t a lot of work to do, or the work is done quickly, you don’t need to waste money paying someone for 40 hours a week.
Myth #3: Outsourcing Is Only for Large Businesses
When you hear the term “outsourcing” you may think of large tech companies hiring brigades of tech support workers overseas, building large buildings to house their offices, and adding potentially hundreds of individuals to the company payroll.
Or, you may think of manufacturing conglomerates shipping components and finished products all over the world. Only large companies have the starting capital to set up contracts with third parties. You may read headlines like “Our Client Saved $14,000,000 Outsourcing to India!” and you’re left to wonder how much money they’re actually moving …
My business is not yet on that scale — this doesn’t have to be the case!
The truth: Outsourcing is for any business, big, small, or just starting up. If a large company can save money by outsourcing to a third party, so can you. The basic financial model is still there.
Why pay a full-time employee when you could pay an expert third party by the hour, so you only pay when you need the work done. And no worrying about employee benefits, perks, insurance, and paid time off. You don’t have to be moving millions of dollars to be able to save a significant amount of money by outsourcing.
Myth #4: Outsourcing Will Take More Time
You’re a busy business operator. You have vendors to maintain relationships with, customers to please, employees to take care of, day-to-day tasks to complete. Especially within the hospitality industry, your business cycles can’t be long.
Customers need hotel rooms tonight, are looking to eat right now, are lined up at the casino or amusement park as we speak. You need to make sure all of your procurement and financial systems are clean, efficient, and on time.
This may lead you to consider keeping your accounts payable and other financials in-house so that you can keep a close eye on the process. Who knows how long a third party would take, and who’s overseeing them? Surely you don’t have time to send off work to another office, have it done there, and sent back in an efficient manner. That’s where you may be mistaken.
The Truth: Outsourcing accounts payable and other financial tasks and departments does not cost you time. In fact, it can actually guarantee that tasks are completed in a timely manner. In-house accounting is tedious and time-consuming.
It’s especially a hassle if you’re a small business or don’t have an accounting department or designated employee. How can you be guaranteed to fit accounts payable and other tasks into your busy schedule? This is why a third party is a good idea.
The third party’s entire job is to take care of your accounts payable and other financial tasks. They aren’t busy working on team-building, day-to-day management, business plans and updates, scheduling, and striking deals with suppliers and vendors. Their whole job is to complete the kinds of tasks you are outsourcing to them.
These experts are efficient and less mistake-prone than an employee who is trained for a wide variety of tasks and responsibilities. They are up-to-date with compliance laws and very familiar with finance rules.
Files can be shared with them instantly through shareable, online files or email. They can complete the tasks for you while you work on other important aspects of running your business.
Myth #5: I Can Do the Bookkeeping Better Myself
It’s very tempting to want to manage everything yourself. This business means a lot to you, and you want to keep it on a short leash and oversee as much as you can. You are a responsible and meticulous person, and perhaps you even have accounting experience. Surely you are the one for the job.
The Truth: Unfortunately, that’s just not possible. Overseeing and completing every task in every aspect of a business is just too much labor and brain power for one person, or a couple partners.
With everything that’s on your plate, you may have difficulty keeping up with the latest compliance laws and finance rules. And since you’re completing so many diverse responsibilities, you are more likely to make mistakes with the bookkeeping.
Established, third-party professionals can focus on the job at hand and complete it in a timely, accurate fashion. They are more likely to have time for the job and less likely to make mistakes. You really will be better off entrusting these tasks to someone besides yourself.
Myth #6: It’s Hard to Find an Accounts Payable Partner
Perhaps you are convinced that outsourcing your accounts payable is a smart move for your business. But where to begin in finding a partner to outsource to? How can you find a partner you trust and who fulfills all your specialized needs?
The Truth: Luckily, there are companies like BirchStreet Systems. BirchStreet Systems is a reliable company trusted by top hospitality brands that provides end-to-end help with all your procurement needs — this includes bookkeeping. Their financial department includes services like BirchStreet Pay which allows you to make all your payments from one easy, secure, automated interface.
Their financial department also provides detailed reports on your business’ financials, compiling easy-to-access information that can help you monitor and tweak your business and procurement models as needed. These automated reports also save someone in your company from having to find, compile, and present the information themselves.
Now that we’ve weeded through some common myths concerning accounts payable outsourcing, we hope you feel more confident in making the right choice for your business.
Remember, outsourcing your financials and bookkeeping can save time, money, and employee resources, and is less mistake-prone than attempting to do everything in-house. Let an outsourcing partner make your job that much easier.