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Accounts payable and receivable (AP and AR) services are key to effective cashflow management. Both AR and AP help understand and provide complete visibility into the financial health of a business. However, given the volume and complexities of the transactions, both these functions are becoming increasingly tedious to manage. The challenge is further compounded by the lack of adequate resources and automation. Business still largely rely on manual and paper intensive functions that pose inherent challenges leading to inefficiencies and human error. And even though business owners/stakeholders understand that these processes do not generate revenue directly, these are critical activities that can have significant impact on business if not managed well.
So, should companies invest further in ramping up the AP AR processes? Or outsource it to an experienced vendor? The former can add to the cost burden with no guarantee in absolute terms that it will improve operational efficiency. On the other hand, according to an online survey, companies that outsourced AP and AR were able to process transactions approximately 59% faster than the ones who did not. Outsourcing can help turn this cost burden into advantage and here we have listed three key benefits that businesses can derive through outsourcing.
Strengthen strategic focus
A large chunk of AP and AR functions include tedious and repetitive tasks, such as tallying invoices with purchase orders and data entry. These activities are time consuming and mundane, making it difficult for in-house resources to utilize their time optimally. Now, by outsourcing AP and AR processes to a specialist, organizations will no longer need to get involved in the web of these operational complexities. It will help free up the resources time, enabling them to use their domain knowledge and focus on core business activities resulting in better decision making and in turn outcomes.
Optimize operational cost
Establishing in-house AP and AR infrastructure can be way more expensive than outsourcing. Investment in staff, technology and infrastructure are all fixed costs, which leave very little room for adjustments, in case business needs to scale down. In addition, there are other costs associated with sourcing and training in-house human resources further adding to the overhead expense. Whereas outsourcing helps convert this expense into a variable cost allowing organizations to scale up and down as per business requirements, with an option to limit headcount. By partnering with an experienced vendor, business get access to complete infrastructure with best-in-class technology and skilled resources geared to handle the tasks from get go, reducing time and upfront cost substantially. While savings may vary based on the volume of transactions and size of the organization, many businesses have been able to contain costs up to 50% resulting in staggering annual savings.
Enhance process efficiency
The most promising of all the advantages is the considerable improvement in the operational efficiency which is very difficult, perhaps even impossible to achieve in-house. Outsourcing engagements are contractually bound to defined Service Level Agreements (SLAs), which is one of the most compelling factors behind efficient deliveries. A well-defined SLA ensures that the outsourcing partner is aligned with the business objectives and are following methodical and global practices to meet these parameters and deliver desired results. Moreover, experienced vendors utilize robust process management tools and frameworks to continually improve performance in terms of turnaround time, quality of work, expense and error rate. Experienced and skilled staff is better trained and adept in managing the processes with dexterity and providing better service to the end customer and suppliers.
Make a shift towards reliable and modern AR and AP operations
As transaction become increasingly complex and digital, businesses would no longer be able to manage AP and AR process in a traditional way. Given the situation, choosing an outsourcing partner is the most affordable and quickest way to transform this operation. By selecting the right partner, businesses can gain access to best-in-class AP and AR infrastructure and services that are not just cost efficient but also leaner.
Combining a unique blend of automation and intelligent data capture, outsourcing partner can not only meet the current needs – but also continually help increase efficiency, contain overhead, enhance accuracy, and above all provide access to information anytime, anywhere.
Tell us your challenges and connect with Springbord to see how we can help you streamline your finance & accounting services and drive up the profitability.
