Accounts payable is one of the classic branches of any company’s financial accounting. It mainly deals with the processing of incoming invoices that suppliers and service providers create at the expense of the company in the context of existing or newly initiated business relationships. The central importance of accounts payable is that the data obtained here provides important business figures and enables reliable statements about the current liquidity status of a company. Can your accounts payable department do this without unnecessary effort? Is your accounts payable future-proof?
Status quo accounts payable
In coordination with the company’s internal departments and the management, the accounts payable department should manage all processes that are part of the proper processing of incoming invoices for goods and services and regularly provide the management with the key data necessary to reliably assess the current liquidity status. The work process includes in particular the following tasks: master record creation, the factual and arithmetical check of incoming invoices, the recording of vendor incoming invoices, the management of open items and the initiation of payments.
In many cases, accounts payable work is still done manually and the exchange of invoices between companies is done in paper form. The associated disadvantages are often high costs, lack of transparency and lengthy processes. Invoice rotations are delayed due to absences, invoices are lost, the processing status is unclear, control mechanisms are not clearly defined and the costs of manual invoice processing are usually completely non-transparent as overhead costs.
In some cases, companies are already using supporting, in-house developed or purchased workflow systems. However, efficient internal automation of processes is complex and requires a lot of know-how. In order to increase productivity, processes must be professionally prepared for digitization. It is not enough to impose digitization and new IT solutions on proven processes. In this case, promised efficiency increases will fail to materialize.
In order to be able to fully exploit cost reduction potentials and optimization opportunities, holistic process optimization must be strived for.
Overall, valuable human and financial resources in financial accounting are often tied up by long processing times and outdated processes. An outsourcing solution can help companies to use capacities to increase efficiency and optimize costs in the long term.
Modernize accounts payable and liquidity management with outsourcing
Especially in the area of accounts payable, there is a lot of potential for accelerating and simplifying processes. Outsourcing partners offer integrated solutions, as a symbiosis of modern workflow technology and efficient processing. Under certain circumstances, the outsourcing company may only retain the factual approval function, electronically. Working with an outsourcing partner can go beyond just accounts payable. High-quality accounts payable management takes the place of in-house processing, which is not very meaningful from a business point of view. The specialized outsourcing partner for accounts payable is leanly organized and provides meaningful figures for cash and liquidity planning. For example, it can be seen in good time whether there will be a need for credit in the short or medium term or whether the release or creation of provisions is imminent. The partner can provide targeted support in the management of cash flows and liquidity planning, so that the company is able to react flexibly and quickly to current requirements.
There are significant advantages associated with the outsourcing of parts or the entire financial system. In addition to the use of specialized process know-how, companies can benefit from the personnel efficiency of the service provider. Absences are optimally cushioned. There is no need to keep personnel reserves available and existing capacities have to be used to add value. The outsourcing company gains in professional quality, which is constantly adapting to the current conditions. Legal changes are maintained and cost-intensive training is eliminated. The service costs can be based on the agreed service level agreements (SLAs) or they are calculated on the basis of the volume of documents that are processed. Fixed costs become demand-oriented, variable costs. In addition, the positive economies of scale from the specialisation of the service provider and the use of the external, standardised IT infrastructure of large data centres can be exploited.
Result
The importance of accounts payable should not be underestimated. It is the basis for liquidity-related decisions and thus an important instrument of corporate management. By means of process optimization and increased digitization in the area of accounts payable, e.g. in the course of outsourcing accounts payable, financial accounting can be simplified, professionalized and made fit for the future. In addition to the cost advantages, quality and capacity effects are the result of outsourcing accounts payable. The process gains flexibility and is fully transparent.
Have you put your accounts payable processes to the test? How do you ensure efficiency in your financial accounting? We look forward to your comments.
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