Avoid These 5 ROI-Killing Mistakes in Accounts Payable Outsourcing  

Accounts payable outsourcing provides your business with a cost-effective route to manage supplier debt. Setting up an outsourced payable function has its challenges, however. Workflows going haywire, payment errors and delays, or poor vendor satisfaction? You’re surely not in for all this! 

So, getting it right from the start helps you build a strong footing for robust and efficient operations. Remember the golden proverb, “Well begun is half done”? 

Let’s underline some early mistakes to avoid for a smooth transition and achieving your AP outsourcing goals. 

5 Mistakes That Ruin Your Payable Outsourcing Experience and ROI 

Any oversights before and while handing over your payable accounting to an external agency can precipitate misunderstanding, chaos, and discontent later. From deciding to hire AP services to finding the suitable contractor and ensuring their proper induction, there is a series of steps you need to tread mindfully. 

Here are some initial missteps that can undermine your overall outsourcing experience, outcomes, and ROI: 

Mistake 1: Not Defining AP Outsourcing Goals Tangibly or Realistically 

You must set well-defined and measurable objectives. What do you want to achieve, and by when? There is no value in chasing faster invoice processing or high payment accuracy without assigning a number to it. For example, a less than 2% invoice processing error rate, a 96% vendor satisfaction score, or an average DPO of 25 is a tangible way to articulate AP goals and key performance indicators (KPIs). 

To avoid this pitfall: 

• Clearly elucidate your payable outsourcing expectations. 

• Define realistic, relevant, and measurable goals 

• Define metrics to track and measure success over a period. 

With clear expectations and performance metrics laid out, the service provider will stay aligned with your operational and business goals and work towards delivering the desired outcomes. However, you must also acknowledge any specific hurdles inherent to your business and discuss tolerances and exceptions. 

Mistake 2: Outsourcing Payable Tasks Warranting Tight Controls 

When you delegate any accounting process to a third party, you necessarily relinquish some degree of control over it. Commonly, businesses outsource their non-core payable accounting tasks and manage critical, highly confidential, or strategic activities in-house. Invoice and payment processing or vendor administration are examples of non-core tasks, while cash management or supplier contract negotiations are more strategic initiatives. 

Things to keep in mind: 

• Conduct a detailed assessment of your P2P processes. 

• Identify core and non-core activities (including exact needs and gaps). 

• Outsource tasks offering the greatest potential for cost and time savings. 

However, you must strike a balance between maintaining control and allowing your service provider the flexibility to do their job efficiently. Additionally, some contractors may be more willing to collaborate with you to develop a control framework that meets your needs. 

Mistake 3: Overlooking Due Diligence in Service Provider Selection 

You will be handing your supplier debt management over to an outside agency. Without proper research and diligence, you risk ending up with a provider who falls short in expertise and necessary resources. Any mishandling would take a toll on your supplier relations and cash position. 

To mitigate this risk: 

• Set up a comprehensive service provider evaluation process. 

• Verify the provider’s industry specialization and credentials. 

• Check customer reviews and ask for referrals. 

Importantly, you should also gauge your potential service partner’s ability to cater to your special needs and handle any specific challenges. Thorough research and selecting a reputable provider increase your chances of achieving a successful outsourcing relationship and results. 

Mistake 4: Lack of a Comprehensive Service-Level Agreement 

A service-level agreement (SLA) serves as a lighthouse and a testimony to the expectations and responsibilities of both parties—you, the client, and the accounts payable services provider. Confusing terms and vague information can lead to performance issues, misunderstandings, and disputes during service. 

To avoid these challenges: 

• Draft a detailed contract that covers the service scope, pricing, KPIs, etc. 

• Include exceptions, exclusions, and dispute resolution mechanisms. 

• Make sure the long-term SLA aligns with your current and evolving needs. 

A thoroughly thought-out service contract is one of the key cornerstones of your successful AP outsourcing arrangement. It is a crucial document for both sides, ensuring clarity and accountability. 

Mistake 5: Accounts Payable Service Partner Onboarding Lapses 

The ball starts rolling for real with the induction of your service provider. Having a proper service provider onboarding program in place helps here! Insufficient planning and lapses in execution can result in a jittery launch and delays. Therefore, make sure your outsourced AP accounting team gets everything it needs to take over. 

For effective provider onboarding: 

• Prepare a thorough induction for outsourced accountants. 

• Facilitate knowledge transfer and system integration. 

• Appoint dedicated resources to manage the handover. 

Please note that a time-bound service partner onboarding process is key to a seamless transition to the outsourced operations. Insufficient planning and execution can lead to errors and disruptions that could have been easily avoided otherwise. 

Looking to streamline your accounting and payables management while focusing on core business growth? Discover how our expert accounts payable outsourcing services can help you optimize your cash flow cost-effectively. Schedule a free consultation with us today.  

Final Take on Accounts Payable Outsourcing Slip-Ups 

Getting it right from the start ensures a smooth launch of your outsourced accounts payable operation. You can mitigate risks and enhance efficiency by setting clear goals, selecting the right tasks to outsource, researching the most suitable accounting services partner, drafting a detailed SLA, and facilitating effective onboarding.

A well-managed outsourced AP process not only brings cost savings but also frees up your internal resources for core activities, making your outsourcing investment a strategic asset!  

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