Accounts payable along with Accounts receivable is
an important process in financial accounting, the first being a
liability and the second a liquid asset. . Proper management of
accounts payable and accounts receivable ensures the proper inflow and
out-flow of cash. In other words the cash flow depends on the skillful
management of these two. The companies have found managing this
particular task a crucial but a time consuming process.
Accounts Payable In-house
In the present day the accounts payable department started doing more
tasks like checking and approving of invoices and bills for all types
of payments. It is a challenging task for small businesses where the
invoices mount in number daily, keeping track of them, even with the
latest innovations in accounting software, it has become a difficult
task. This occurs because the small business owners have varied
responsibilities and establishing a separate department may have to
incur huge expenses and it also delays in execution and duplication of
work. Also small businesses may not need to have an entire department
dedicated to accounts payable and they may need it only during their
accounts payable time. In these situations it is more economical for
small businesses to outsource their accounts payable work.
Outsourcing Accounts Payable
Outsourcing accounts payable may enable the managers to concentrate
better on their regular work. On many an occasion it is reported that
the manger’s valuable time is consumed in overseeing the regular
administrative work. Next the HR may have to find the right people with
the right qualifications and skills to manage such work. The
infrastructure required to run such a department may have to be
established. Many small businesses have realized the various benefits
of outsourcing and have gone for small business accounts payable
outsourcing. When small businesses outsource their accounts payable,
they get relieved of the burden of doing the non-core works or oft
repeated tasks.
For small businesses any lapse in accounts payable may end up in a
loss. The losses may occur through penalties for delayed payments, loss
of discounts offered for timely payment, and loss of goodwill. Accounts
payable is accounts receivable to another company. Only when these two
accounts are carefully managed the cash flow can be healthy. So
companies allow discounts as incentives, when they get payment on time
but collect penal sums when they are in default.
Following are some of the benefits of small business accounts payable
outsourcing:
1. Paying the invoices on the due date as per the company’s policies.
2. See to the accuracy and the authenticity of the invoices that fall
due and make a one to one co- relation of checks issued and invoices
that receive payment.
3. Monthly, quarterly, half-yearly and annual reports are easily made
available.
4. Tax related work is done without loss of man-hours at the company
level and they all get ready on time for the CPA perusal.
5. Compliance to Sox is automatically carried out.
6. New improvements are incorporated immediately.
7. The company can demand the best service at the lowest cost from the
provider.
8. When outsourced to India or other countries the cost of maintaining
such accounts is much less compared to huge expenditure and capital
needed for in-house department.
9. Any reference to any particular account can be assessed immediately
and action taken.
10.Need for continuous training of personnel is avoided.
11. The expenditure connected to the provider will remain constant for
a particular period of time since it of contractual nature.
12. The managers or CEOs of small business will have a clear picture of
their liabilities and the nature of cash flow since the provider and
details keep the account payable picture up-to-date are readily made
available.
13. The managers or CEOs of small business can plan future plan-outlays
with certainty.
Small business accounts payable outsourcings have some risk
Outsourcing financial accounts payable even by small businesses has
come to stay. Hence it is imperative to be aware of the risks involved
in outsourcing any or all the accounts payable processes to an outside
service provider. The understanding of the outsource service provider
of the needs of the clients and the provider’s quality of service may
affect the performance of the small business. Other factors like the
legal implications; the company has to take on the responsibilities for
all acts-inclusive that of the outsource provider. Combined with this
the lack of knowledge of the modern developments in accounts payable
processes on the part of the provider may add to the problems to the
small businesses. The loss of control is another risk that are faced by
the small businesses. The outsource provider gets the information about
the small businesses suppliers, cost, terms and conditions etc., this
may be vital information for competitors.
By carefully doing their due diligence in selecting the outsource
provider small businesses can completely avoid all the risks associated
with the accounts payable outsourcing and at the end they will gain all
the benefits of accounts payable outsourcing.
Article Source:
http://www.articlesbase.com/small-business-articles/benefits-of-
outsourcing-accounts-payable-ap-in-small-business-225271.html About the Author
Mani Malarvannan is cofounder of Cybelink, a
company specializes in small business financial and accounting
outsourcing like Bookkeeping, Tax, Accounts Payable, Accounts
Receivable, etc. For more info visit www.cybelink.com |
