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Home » How to outsource accounts payable: step-by-step guide of SMEs and startups.
How to outsource accounts payable: step-by-step guide of SMEs and startups.

Is Your Accounts Payable Process Costing You More Than You Think?

Your bills are the largest drain on your company’s cash flow, not the shrinking sales or escalating costs. To a great number of small and mid-sized enterprises, one of the most essential financial functions, yet neglected, is Accounts Payable (AP). In a slow, inaccurate, or resource-consuming AP, it is not only a hassle for the administration but also costly for suppliers and irritating to suppliers.

The statistics represent a handful of shocking tales. Research findings indicate that more than 60 percent of companies continue to waste over 10+ hours per week manually processing invoices in 2025, two-thirds of teams still key in invoice data by hand, and mistakes and inefficiencies continue to rise. These archaic processes are increasingly becoming a liability to finance departments and an expensive nuisance to strategic work.

That is where Accounts Payable outsourcing comes into play. Outsourcing replaces in-house procurement and billing responsibilities, with excess personnel and outdated systems, where the main responsibility lies with the AP providers, who can combine skills, automation, and scalable processes. This not only lowers operating costs but also minimizes errors, accelerates processing cycles, and enhances relationships with vendors.

By way of illustration, collaborating with committed AP firms has helped organizations reduce invoice processing time by up to 40%, enhance efficiency through automated approval and validation controls, and enable real-time payments and cash accounting.

In a world where business executives prioritize cash flow maximization and risk avoidance, AP outsourcing is not a luxury but a powerful instrument that helps ensure financial stability and further development.

Also Read: AP Automation: Revolutionizing Accounts Payable

There are several reasons outsourced accounts payable is better than doing it yourself or hiring an in-house pro. Let’s go over them to get some more perspective:

What Is Accounts Payable (AP) Outsourcing?

Accounts Payable outsourcing refers to the process of transferring your company’s accounts payable duties, including invoice processing, payment scheduling, vendor reconciliation, and compliance reporting, to a third-party service provider. 

Instead of employing and maintaining your own staff of people to perform these roles and duties, you outsource and contract professionals to perform these roles on your behalf, and with standardized procedures and workflows to maintain accuracy, speed, and transparency.

Why Accounts Payable Outsourcing is a Game-Changer

Accounts payable outsourcing is a relatively small change that has a big impact on a business. Currently, the goal for most companies is to maintain financial stability and stockpile enough cash to weather any incoming economic shocks. AP outsourcing kills two birds with one stone.

On one hand, AP outsourcing is a great avenue for cost savings. It is a business function that deals entirely with how the business pays its expenses. AP professionals are not just glorified bill payers. They manage the business’s expenses and help control costs. They are also the negotiators who stay in touch with vendors and forge strong business relations, which can render exclusive discounts and better prices.

On top of that, accounts payable is responsible for preventing payment default. Businesses cannot afford to be late on payments right now, when money is so important. In the same vein, the job market is currently experiencing one of its worst years. 

Worker morale is down, and everyone is looking to find new opportunities. A good accounts payable professional keeps the workers happy. Timely wages and salaries boost employee retention, saving you money on hiring new employees.

In so many ways, accounts payable is directly and indirectly linked with the business’s cash flow. Sloppily managed accounts payable can sink a business as costs run out of control and team morale declines. 

This is why outsourced accounts payable is a great solution. Such professionals cost a fraction of what an in-house professional charges while offering the same quality of accounting. The only caveat is that they are remote, but after the pandemic, there are very few reasons left to doubt the power of remote work.

How to Outsource Your Accounts Payable: A Step-by-Step Guide

Business Evaluation

The first step to outsourced accounts payable is self-evaluation. As a business owner, you need to identify your business’s AP needs. You can’t go to the market if you don’t know what you’re shopping for. Make a list of the usual AP activities your business goes through. Think about what can be improved and what you would want to expand the role into if you had a professional accountant.

For example, if your current AP process is just paying bills and talking to vendors, think of what more can be done if an accountant were in your shoes. They could negotiate better deals, suggest cost cuts and point out frivolous expenses, bolster employee loyalty, and so much more. Once you have a list of things you want addressed by an AP professional, it’s time to hit the market. Or in this case, the internet.

Market Research

The next step is to browse the market and see what’s out there. The past five years have seen outsourcing become a booming industry, with thousands of providers active worldwide. With so many providers out there, it naturally becomes difficult to separate the wheat from the chaff. What’s worse is that many malicious actors have taken to opening fake firms to swindle entrepreneurs out of their hard-earned money.

The first rule when hunting for accounts payable outsourcing services is to be wary of such actors. Common signs include unbelievably tempting offers at extremely low prices, endorsements from multiple famous accountants, and a distinct lack of negative reviews. These are all red flags that something is wrong. Of course, they may be legitimate and accidentally fall into the stereotype. So, what do we do?

The answer is always verification. If you see a particularly appealing prospect, ask about them in the market. Search for their business registration and verify with the state government that it is legitimate. Call their advertised clientele for reviews. All of these things can be done with a couple of phone calls and can save you from a potential catastrophe.

Following these guidelines, shortlist around ten or so firms that are up to your standards and within budget. After this, it’s time to meet.

Meeting and Negotiations

After shortlisting outsourced service providers, schedule interviews with all of them. A key point to remember is that you are still in the market research phase. This is just the part where you are gauging the service providers directly and negotiating on potential contract terms. 

Try to schedule face-to-face meetings at their office, as this not only demonstrates legitimacy but also gives you a chance to see how their operations run.

If the firm is headquartered abroad, schedule an online meeting and ensure the camera is turned on. The provider’s body language and demeanor can tell you a lot about the veracity of their claims. You need to be able to discern who is selling snake oil and who is selling outsourced accounts payable.

Before the meeting, the bare minimum preparation you need to do is to decide on contractual terms. Hire a lawyer to draft a contractual proposal for your needs. Mention the budget, the required services, the terms of retention, and how the relationship will work. This is a complicated legal procedure that varies state by state, so it is best to get a lawyer’s help.

Once you have your desired terms set, it’s time to negotiate. During negotiations, put forward your list of requirements. Inquire about every task you need addressed and ask how they can address it. 

Try not to show excessive interest in any of their proposals, as this could give them leverage in the discussion. Maintain a neutral face and take notes of the conversation. Also, provide each firm with a hypothetical business model and ask them how they can add value to it.

Do not decide after one meeting. Have one meeting with every prospective firm, and at the end, shortlist five that best fit your needs and budget.

Finalizing the Deal

It’s now time to interview the shortlisted firms once more. Arrange meetings, and this time, put your proposed contract forward. Ask if they can provide what you need within their budget. Another extra edge you can give yourself is to augment the proposal’s budget based on the firm’s advertised rates. 

This way, you are not overpaying by presenting a proposal with a budget higher than their normal rates. Keep the rates slightly lower, and negotiate on the premise of a long-term collaboration.

An outsourced services provider would gladly negotiate better rates for the promise of long-term retention. Of course, this only applies if you actually do plan to make it a long-term arrangement, which is recommended.

After hashing out potential deals with every firm, evaluate their terms and their displayed proficiency to make your decision. This is where your personal judgement will play the biggest role. Do not just pick the cheapest offer. Try to strike a balance and choose a provider that not only meets your parameters but also demonstrates competence.

10 Accounts Payable Outsourcing Best Practices:

Have you ever wondered whether your accounts payable process is contributing to your business’s growth? To most companies, particularly small and medium-sized companies, AP is not merely about paying bills but a major driver of cash flow, vendor trust, and financial precision.

The bottom line is that it would take an average of over 9 days and cost more than 15 on every invoice, compared to modern, outsourced, or automated processes, which take 2-5 days and cost less than 4, with significantly lower error rates (Clyr). This performance disparity directly affects working capital and supplier relationships.

When an outsourcing transaction is executed correctly, accounts payable outsourcing can do more than just reduce costs (DBS Ltd.). It brings professionalism, scalability, automation, and financial transparency, freeing internal teams to focus on strategic finance operations and long-term growth. The ten tips below will help you ensure that your AP outsourcing initiative delivers quantifiable output and value.

1.KPIs and Clear Goals:

Establish performance objectives. State the success criteria – is it lowering invoice processing time, raising accuracy, lowering costs, or enhancing vendor satisfaction?

As an example, target such metrics as 95 percent of invoices paid within 3 days or almost zero duplicate payments. Defined KPIs simplify holding your provider accountable and monitoring progress along the way (MYND).

2.Find an Outsourcing Partner Domain Expertise:

AP providers do not offer the same amount of service. Select a partner that has demonstrated experience in accounts payable and not general BPO. Experienced providers know about compliance requirements and typical traps, such as paying twice or receiving an invoice that does not match the payment, which can destroy vendor confidence and cash flow (Spendflo).

3.Prefer Integration with Your Financial Systems:

A successful AP outsourcing engagement is not an independent module; it should be integrated with your existing ERP, accounting software, and payment systems. The compatibility will enable data flow, reduce the rate of reconciliation errors, and let your finance team see the data in real time (TDSGS).

4.Necessary Security and Compliance Measures:

Outsourcing implies providing confidential financial information. Ensure that your provider is well-equipped with data security measures, including data encryption, secure storage, and regulatory compliance (e.g., GDPR or SOC 2). The secrecy of your financial information also helps keep trust intact and protects you from breaches (Spendflo).

5.Automation and Advanced Tools to Reduce Manual Errors:

The leading accounts payable outsourcing vendors use automation technologies such as optical character recognition (OCR), robotic process automation (RPA), and machine learning to process invoices. It has been found that automation can significantly reduce error rates compared to manual entry, leaving your team unburdened by routine work (VAH).

6.Develop strong Service Level Agreements (SLAs):

The SLA must be more than a cost-reduction measure; it must include specifications for quality, turnaround time, communication, and escalation policies. Properly written SLAs can help ensure stable performance and provide you with an option if expectations are not met (TDSGS).

7.Sustained Performance Monitoring and Reporting:

Good outsourcing is not a one-and-done thing. Regularly track performance with the help of dashboards and reports, which monitor fundamental metrics such as invoice cycle time, payment accuracy, and vendor satisfaction. This real-time monitoring assists you in identifying problems at the earliest and taking corrective measures in a short time (MYND).

8.Interact With Your Outsourcing Team Often:

Effective communication networks result in a much easier operation. Once a week, hold check-ins, establish an escalation route for urgent matters, and ensure your internal finance team and the outsourcing partner are always aligned on expectations and workflows (MYND).

9.Phase Implementation to Reduce Disruption:

Outsourcing does not need to be an overnight event, but a gradual one that is likely to start with the entry and issuance of invoices initially, before expanding to other areas such as vendor payments and reconciliations. This is to assist your team to be adaptable and ensure quality control in terms of shifting responsibilities (TDSGS).

10.Develop a Partnership (Not a Sales Process):

Lastly, treat your outsourcing partner not only as a vendor but also as a part of your finance team. Team spirit fosters collective ambitions and the initiative to solve problems.

Expertise Accelerated as Your Outsourced Accounts Payable Ally!

Expertise Accelerated is an outsourced accounting firm in Connecticut that offers a wide breadth of accounting, supply chain management, and project management services to US businesses.

EA’s outsourced accounts payable services offer businesses a veritable treasure trove of opportunity. At EA, we pride ourselves on our customer-first approach, offering a chance to achieve up to 60% payroll savings for small businesses.

As a small business ourselves, we understand the plight of the underdog. Competing against massive corporations is a huge wall to overcome, but you can only do so if you take the first step up the ladder. In this case, the ladder would be EA, lifting you one rung at a time until your business soars just as high as the rest of the big players .

Join us at EA, and with our outsourced accounts payable services, bring your ambitions to life and sail through the economic maelstrom. We know you can, and will be the sail in your winds, pushing you ever forward.