Accounts Payable Outsourcing A Good Choice?}

Accounts Payable Outsourcing- a Good Choice?

by

Neil Westling

Before we can begin to understand how a company l benefits from account payable outsourcing, we need to observe what the term account payable means.

Account payable is a file or account sub-ledger that records the amount of money in which a company owes to a supplier. It is an unpaid debt resulting from purchasing assets or receiving services from suppliers. Creditors or suppliers allow the customers to pay for products or services after it has already been received. Account payable which is commonly known as payables are the items that appear on the companys balance sheet which represent the obligation of the company or liability to pay debt to its creditors.

The term accounts payable also refers to an accounting department that manages payments owed by the company to suppliers and other creditors. This unit is responsible for authorizing purchase orders, collecting receipts and organizing account withdrawals. They are also typically in charge of keeping records of the general ledger, auditing expense reports, addressing deficiency and responding to dealer inquiries. These series of tasks means that the job of an accounts payable personnel is a very crucial part of every company. Account payable departments should be organized and attentive to details. This is because they will need to pay bills on time and according to the specific terms and conditions which may affect the credit ratings of the company and business relationships.

Since a large manual effort is required to encode invoices into the accounting system, match invoices to purchases, match orders and receipts, and so on, most companies spend a lot of money in processing account payables. Accounts payable outsourcing should be considered if the company is spending too much in managing account payables or if there is a vague knowledge on the companys outstanding liabilities. If here is no defined and well-documented business rules that match invoices to purchase orders and receipts, the company may consider outsourcing as well.

With todays global market trend, if the company is having difficulty in keeping track of the amount payables, they can deal with this situation by means of outsourcing accounts payable service from an outsourcing company. If the companys accounts payable system is not efficient, there will additional costs for late payments, missed discounts, reproduction payments and rewrite. By outsourcing accounts payable the company can increase efficiencies while cutting costs in areas of financial operations.

Many companies that deal with finance outsourcing are offering accounts payable outsourcing services. These services provide companies the advantage of state-of-the-art technology and competent staff without them having to invest in the resources themselves.

Outsourcing providers of accounts payable transform the companys payment activity through automatic processing of documents, transaction management, disbursement-related services, elimination of duplication, and exception resolution. By outsourcing, processing costs and cycle times are lessened while increasing management control and visibility of the entire business process.

Accounts payable outsourcing can be a great challenge for the company. Providers will be handling a great deal of the companys sensitive information such as addresses, contact numbers of suppliers, identification numbers of taxpayers, and even bank account information. Companies should scrutinize providers security arrangements for its clients before taking advantage of the service. Outsourcing companies should exercise excellent security measures to protect the personal identities and financial data of their clients.

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