Managing accounts payable (A/P) can be challenging for any business, especially for small and medium-sized enterprises or non-profits. The volume of transactions, invoices, and payments can become overwhelming and complex, leading to inefficiencies and security risks.
Many organizations are turning to outsourced bill pay services to solve these issues, which can help improve efficiency, accuracy, and security. The demand for these services has grown in recent years as more organizations seek to streamline their operations and reduce the risk of financial fraud.
What is outsourced bill pay?
Outsourced bill-pay services streamline the accounts payable process by turning over management to a third-party provider. Outsourcing results in a more efficient and secure process, reducing the number of steps involved in paying a bill to just a few.
Manually paying bills entails opening and reviewing statements, typing data into a system, getting approval, cutting a check, mailing it, and filing all related documents. However, with outsourced bill pay, vendor invoices can be emailed directly to your service provider, where the data is extracted to determine who the vendor is, what the expenses are, and the dollar amount. Then a human (or humans) verifies the information and processes the payment with a few clicks. The result is faster and more efficient payment processing.
Benefits of third-party bill payment
Efficiency and scalability
Hiring a third party to handle your organization’s A/P can significantly reduce the time spent on internal bill processing and audit preparation. There are many steps to receiving and processing payables, and by outsourcing, a business can significantly reduce that workload. Furthermore, outsourced bill pay will scale as the business grows without hiring additional personnel or investing in new technology.
Outsourced bill pay services provide a layer of security and reduce the risk of fraud in multiple ways. First, having a single employee handle all A/P processes, such as reviewing bills, categorizing them, paying them, and entering them into the accounting system, greatly increases the risk of fraud as it leaves room for errors and unethical behavior. On the other hand, outsourced bill pay services offer multiple levels of oversight and checks and balances. This means that multiple individuals are involved in the review, verification, and payment processes, reducing the risk of fraud and increasing accuracy.
Furthermore, outsourced bill pay services typically have the resources and technology to detect and prevent fraudulent activities, such as using advanced fraud detection software and protocols. They have policies and procedures in place to address fraud, should it occur, and have experience handling such situations. Additionally, outsourced bill pay services often provide secure electronic storage for bills and payments, which reduces the risk of theft or loss of important financial documents.
Outsourcing A/P can significantly reduce the risk of duplicate payments and errors because all invoices are categorized, matched to purchase orders (if applicable), and validated according to your established parameters. Invoices that meet certain requirements can be routed to the appropriate person or department within your organization for validation, while others can be processed automatically. For instance, all invoices over $2,000 may require validation, whereas the monthly utility bill may be processed automatically. This process helps to minimize your time in reviewing invoices, speeds up the payment process, and improves accuracy.
Outsourced bill pay enables the division of responsibilities without hiring additional employees. This division of responsibilities ensures that multiple eyes and checks are placed on the A/P process. Typically, this would require hiring multiple employees, but outsourcing eliminates the need to hire these employees, as the service provider already has a team of professionals. This reduces the need for investment in human resources, payroll and benefits, and office space, making outsourcing a cost-effective solution. The service provider may also provide access to the latest technology, including automation tools and data analytics.
Increased vendor satisfaction
By outsourcing bill pay, a business can ensure that vendors are paid on time and consistently, which can improve your relationship with suppliers. When vendors are paid promptly and accurately, they are more likely to continue doing business with the organization, contributing to a more stable and long-lasting business relationship.
Integrated accounting services
Having your A/P managed by the same service provider that manages your other accounting services makes it easier to achieve a more comprehensive view of your financial operations. By integrating A/P services with other accounting functions, you can streamline processes, improve accuracy, and reduce potential errors. This increased accuracy and efficiency is especially valuable around tax time, as it minimizes the risk of errors that could result in fines or penalties. It also saves time and reduces costs, as it eliminates the need for manual data reconciliation between different systems.
This article provides a brief overview of the benefits of third-party bill pay services and is not a substitute for speaking with one of our expert advisors. Please contact our office if you would like to learn more about outsourced bill pay.