How To Outsource AP and AR Without Losing Financial Control

Outsourcing accounts payable (AP) and accounts receivable (AR) functions can transform your business's financial operations. When implemented strategically, outsourcing these critical accounting processes allows companies to reduce costs while improving accuracy and efficiency.

What Are AP and AR Outsourcing Services?

Accounts payable (AP) outsourcing involves delegating the management of your company's payment obligations to external service providers. These specialists handle invoice processing, payment approvals, vendor management, and disbursements. The outsourcing partner typically employs advanced automation tools to streamline these processes.

Similarly, accounts receivable (AR) outsourcing transfers the responsibility of collecting payments from customers to third-party experts. These professionals manage invoicing, payment collection, credit management, and dispute resolution. Both services allow businesses to focus on core operations while financial experts handle these time-consuming accounting functions.

How AP and AR Outsourcing Works

The outsourcing process begins with selecting the right provider based on your specific business needs. Once onboarded, the outsourcing company implements specialized software systems that integrate with your existing accounting infrastructure. They establish standardized procedures for invoice processing, payment approvals, and collection activities.

For AP outsourcing, vendors submit invoices directly to the service provider, who validates them against purchase orders, obtains necessary approvals, and processes payments according to established schedules. With AR outsourcing, the provider generates and distributes customer invoices, tracks payment status, follows up on late payments, and reconciles accounts. Regular reporting keeps your internal team informed while the day-to-day execution happens externally.

AP and AR Outsourcing Provider Comparison

When evaluating potential outsourcing partners, consider these key providers and their specialties:

Provider	Specialization	Best For
Billtrust	AR Automation	Mid-size to enterprise businesses
Tipalti	AP Automation	Growing companies with international payments
BlackLine	Financial Close Management	Large enterprises needing comprehensive solutions
Abrigo	Financial Risk Management	Financial institutions

Each provider offers different pricing models, implementation timelines, and integration capabilities. Deltek specializes in industry-specific solutions, while Kofax focuses on document-centric process automation. The right choice depends on your company's size, industry, and specific requirements.

Benefits of Outsourcing AP and AR Functions

Cost Reduction: Outsourcing typically costs less than maintaining an in-house team with full-time salaries, benefits, training, and infrastructure expenses. Many businesses report savings of 30-50% compared to internal processing.

Improved Accuracy: Specialized providers use advanced automation and have dedicated teams focused solely on financial processing, reducing errors significantly. Avalara offers solutions that ensure tax compliance while SAP Concur provides expense management automation that integrates seamlessly with AP processes.

Enhanced Cash Flow: Professional AR management accelerates collections, while optimized AP processes help capture early payment discounts. This dual approach improves overall cash flow positioning. Additionally, Expensify offers solutions that streamline expense reporting and reimbursement, further enhancing financial efficiency.

Potential Drawbacks and Challenges

Initial Transition Complexity: The implementation phase requires careful planning and coordination. Businesses must allocate resources to manage the transition smoothly and minimize disruption.

Data Security Concerns: Sharing financial information with third parties necessitates robust security measures. Verify that potential providers maintain SOC 1 and SOC 2 compliance, implement encryption protocols, and have clear data protection policies. Oracle NetSuite offers solutions with built-in security features specifically designed for financial processes.

Loss of Direct Control: While outsourcing partners provide regular reporting, businesses must establish clear communication channels and performance metrics to maintain visibility into operations. Implementing service level agreements (SLAs) with specific performance guarantees can help mitigate this concern.

Conclusion

Outsourcing AP and AR functions represents a strategic opportunity for businesses seeking to optimize their financial operations. By carefully selecting the right provider, establishing clear processes, and maintaining appropriate oversight, companies can realize significant benefits in cost savings, accuracy, and operational efficiency. The key to successful outsourcing lies in treating your provider as a strategic partner rather than just a vendor. With proper implementation and management, AP and AR outsourcing can transform your financial operations and allow your team to focus on core business activities that drive growth and profitability.

Citations

This content was written by AI and reviewed by a human for quality and compliance.