Accounting Best Practices, Fifth Edition

3–26. Outsource the Accounts Payable Function

Many controllers do not want to waste time managing such a mundane function as accounts payable. It does not directly contribute to the mission of any company, nor does it impact customer service. In short, it is a baseline clerical function that merely takes up management time with no particular payback. By off-loading this function to a supplier who specializes in accounts payable processing, a controller can reduce the management time devoted to this functional area and allocate more time to other more profitable company functions.

Besides reduced management time, it can also be less expensive to outsource to a qualified supplier. A well-run supplier has an excellent knowledge of accounts payable best practices and uses that knowledge to drastically cut the processing effort needed. This is an especially attractive option for those companies that are in difficult financial circumstances and that would prefer to pay just a per-transaction fee, rather than an entire staff. This essentially converts a large fixed cost to a variable cost that will not be incurred if there are no transactions to process.

Outsourcing accounts payable usually means that the entire company staff devoted to this work will be shifted to the supplier who is taking over the work, though it is also possible that the supplier will not need these people, or will “cherry-pick” only the most qualified. If the latter is the case, then the controller should meet with ...