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.
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
Got a Question? Ask.
Ask the community a question about this article:
Q&A Powered by:
Latest Small Business Articles
Google Adsense : an Introduction
By: upinder singh negi2 | 18/07/2008
For many people, Google's Adsense publishing program is responsible for their very first taste of an online income. It may be pennies and cents but that first time you look in your account and see a credit is an exciting moment.
How to Improve Business Signs Through Digital Printing
By: Joel Owens | 17/07/2008
Business signs have never been easier to do. Thanks to the advancement of technology, including the development of digital printing. This is the time when you have to exhaust the available resources around you and maximize their potentials to work to your advantage.
Profits of Google Adsense
By: upinder singh negi2 | 17/07/2008
Are you a webmaster who needs funds to keep your website running? Or is your website the only way for you to earn income? Whichever you are, for as long as you are a webmaster or a web publisher and you need cash, affiliate marketing may work well for you.
How You Do Internet Business
By: upinder singh negi2 | 17/07/2008
Internet business mastery is something that can be learned from a mentor. The problem with most of us is we think we know everything by browsing the net and try to do something different than what others do.
Journey of Google Adsense
By: upinder singh negi2 | 17/07/2008
As a blogger, I started creating websites that I found personally interesting to me. I found articles that were fun and interesting and posted them for people to read. After all.. people create blogs so they can share their feelings and aspirations.
Memorial Jewelry: Having Your Departed Loved One Close at Heart Through an Urn Necklace
By: sumeetha Gowda | 17/07/2008
There is now a way to have your departed loved one close to you everyday, thanks to the concept of memorial jewelry. Cremation jewelry, remembrance jewelry, keepsake necklace - whatever everyone else calls it, it practically refers to the same thing. It is a piece of jewelry that holds a small portion of your loved one's cremated remains.
Cremation Urns - Preserving the Memory of Your Loved One Forever
By: sumeetha Gowda | 17/07/2008
Many people who have chosen to cremate their loved one who passed away make the mistake of taking the cremation urns for granted. It is very important to remember that a cremation urn is more than just an ordinary container. It is a container which contains the ashes of your loved one - of what has remained after he or she has gone. It will keep and hold the memory of your loved one alive not only for this lifetime but for many lifetimes after yours.
5 Most Important Point When Placing Google Adsense
By: Praveen Kumarii | 17/07/2008
I have been adding Google Adsense to my websites for a couple of years now with great success. It's amazing how adsense earnings can turn into another significant monthly income stream with little effort on your part.
More from Mani Malarvannan
Small Business Financial & Accounting (f&a) Offshore Outsourcing Cost
By: Mani Malarvannan | 05/10/2007 | Small Business
Often small businesses will consider only the cost paid to the offshore vendor in their ROI analysis when considering offshore vendors for their financial and accounting work. But there several other one time and monthly costs they need to consider in their total cost calculations. This article explores what are all the different costs small businesses must consider in their Total Cost Analysis so that they can estimate the overall ROI of their offshore engagement.
Outsourcing Accounts Receivable (ar) - Benefits
By: Mani Malarvannan | 26/09/2007 | Small Business
Outsourcing Accounts Receivable (AR) have lots of benefit for Small Business. Here we have discussed some of them.
Offshore Accounting Bpo - Myths and Realities
By: Mani Malarvannan | 10/09/2007 | Advice
Though there is some myth present but still reality prevails over the myth
Accounting Outsourcing- Top Ten Genuine Tips
By: Mani Malarvannan | 06/09/2007 | Small Business
In this article you learn about Top ten tips small businesses should consider before outsourcing their accounting work. By following these simple tips you can have greater success in your outsourced accounting projects
How Small Businesses Can Manage Offshore Outsourcing
By: Mani Malarvannan | 31/08/2007 | Small Business
BPO can help small business in reducing the cost thus increases the productivity and efficiency by which small business can expand their core business. By outsourcing their business processes, the company is free to concentrate on its area of expertise and leave processes such as accounting, book keeping and auditing to the professionals.
Small Businesses Should Definitely Use Accounting Software
By: Mani Malarvannan | 31/08/2007 | Small Business
Using Accounting software can be profitable for you as it can help you immensely.
Small Business Outsourcing Have Some Security Risk – a Report
By: Mani Malarvannan | 14/08/2007 | Business
Several security issues linked with outsourcing. Top ten security risks small business should know before they outsource their work
What is Kpo
By: Mani Malarvannan | 14/08/2007 | Customer Service
Though KPO service providers offer their clients an opportunity to work with some of the best brains in the profession without having to hire them permanently but still KPO reduces the cost of the company by 40-60% that the company may require in their country of origin. Thus the company gets best service without the sacrifice of the quality.
Business 
