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Should you outsource your accounts payable?

A small business owner organizing invoices and bills in her workshop.
Adi Trudler
Published at | Updated:

More often than not, as a small business owner you take care of everything, including the finances. And even if you have an accountant or bookkeeper, a lot of business owners prefer to do the accounts payable themselves–that includes managing, keeping track of and paying invoices. 

But what if it’s best to outsource that aspect of your business? Let’s dive in and consider the pros and cons.

What exactly is accounts payable? 

Accounts payable, or AP, is all the money that your business owes or needs to pay. That includes all your business expenses such as rent, taxes, utility bills, supplies, and vendors. When finances are properly managed, there should always be enough money to pay all the bills. Plus, your invoices will be correctly documented. 

Why keep AP in-house? 

It makes sense that the person who talks to the vendors on a daily basis would be the one to handle invoices and payments. That way, you can build strong relationships and know exactly what is owed, and when. 

Here are the top 3 reasons to keep the AP in-house. 

1. Keep control 

As a business owner, you always want to stay on top of everything and make sure that the money going out of your business is really the right amount. Keeping all AP in-house means you have more control over every payment and can be more aware of what amounts are going out at all times. 

2. Maintain workflows

By now, you probably already have a workflow that works for you. Vendors give you invoices, someone uploads invoices to your accounting software, you or your staff pay them, and that’s that. When you keep the AP in-house, you get to keep the workflow you have in place and avoid mistakes.  

3. No need to rely on a third party

Let’s face it, trusting others with our own money is not easy. It’s always hard to involve someone new in the process, especially an outsider who doesn’t care for the business as much as you do. When keeping things in-house, fewer people are involved and you know you can trust those who are helping out. 

Why outsource AP? 

Things get more complicated as the business grows and it’s time to move all of your business management online. When that stage comes, you want to make sure you’re especially organized and all your books are up to date. It’s smart to hire a professional to manage the books, the invoices, and pay the bills–and to use one online solution for all of that. 

Here are the Top reasons to outsource AP. 

Less errors

As your business grows, so does the number of invoices. When you start noticing there are many errors, it could be the result of employee burnout or a lack of standardized processes. In fact, approximately 0.1% to 0.05% of invoices paid are typically duplicate payments. Working with a third party equipped with the technology and experience to minimize errors can go a long way.

More advanced technology

Many vendors are working with paper invoices and paper checks. But as bill pay solutions allow you to pay by credit card or bank transfer you can go digital, even if other businesses around you don’t. 

Improve vendor relationships

We’ve already mentioned how doing the AP yourself can benefit your relationship with suppliers and vendors. However, as the team and business grow, the work overload can lead to late payments or missed payments altogether. Other than the obvious outcome of that, vendors will sometimes resend the same invoice, to multiple mediums which can result in double-paying an invoice. 

It’s their expertise

Accountants and bookkeepers already know how to use digital AP tools. They can handle every aspect of your finances–from AP to taxes–and save you a lot of time. They know best how to combine accounting tools like QuickBooks and AP tools like Melio in ways that’ll save you money.

Focus on the craft

Whether you own a restaurant, run a construction company or sell home decor, when hiring a third party to manage the AP you and your team are free to do some higher-level tasks.

Rapid growth

When companies grow quickly, a proper scaling plan must be put in place. If the growing workload affects the in-house financial team (or business owner), it’s time to outsource AP. 

Reduced costs

There is a cost to outsourcing AP but it’s more expensive to hire and train new staff. Plus, manual AP methods can lead to unnecessary costs. Manually processing a single invoice can cost as much as $30. 

So, AP outsourcing yay or nay? 

While both options have their pros and cons, at the end of the day, it really is about how comfortable you as a business owner are with trusting someone outside of your organization. 

If you’re still not sure about outsourcing, you can try managing the AP process yourself, by digitizing it. This allows you to keep it in-house while reducing human error and costs. 

*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.