Identifying your biggest business drivers at the start – and aligning your leadership team and BPO provider behind them – ensures the greatest value. AP outsourcing is a proven path to modernizing operations and accelerating digital transformation – when it’s executed properly. In bottom-performing departments, late payments are all too common as invoice approvals drag for days and AP staff waste about a quarter of their time chasing down missing or inaccurate information. But the pandemic accelerated the pace – creating mounting pressure for CFOs to minimize costs, maximize productivity, adjust to a remote workforce, and increase their team’s focus on more strategic activities. Evaluate the provider’s ability to scale with your business and align with your specific AP needs.
In 2017, in India, the BPO industry generated US$30 billion in revenue according to the national industry association. One estimate of the worldwide BPO market from the BPO Services Global Industry Almanac 2017, puts the size of the industry in 2016 at about US$140 billion. With the average length of a BPO contract being 5 years or more – and many contracts being longer – this hypothesis will take some time to play out. Unclear contractual issues are not the only risks; there’s also changing requirements and unforeseen charges, failure to meet service levels, and a dependence on the BPO which reduces flexibility. BPO can be offshore outsourcing, near-shore outsourcing to a nearby country, or onshore outsourcing to the same country. Today, there are web based print to mail solutions for small to mid-size companies which allow the user to send one to thousands of documents into the mail stream, directly from a desktop or web interface.
Besides an innovation agenda, your outsourcer should also demonstrate deep finance subject matter expertise and a robust approach to process documentation. Basic expectations are obvious, demanding proven processes that ensure invoices are paid accurately and on time. In contrast, onshore solutions (US-based) bring the highest costs and typically high turnover from workers who generally often see transactional tasks as beneath them. Improving quality and automation, cutting costs, gaining access to a more stable pool of qualified talent, and freeing up internal teams for higher-value activities are common drivers. For instance, top-performing AP teams process nearly four times the number of invoices than bottom performers, according to American Productivity & Quality Center (APQC) benchmarking data. In fact, Deloitte reports that COVID challenges have most organizations focused on “standardization and process efficiency” as their top strategic objective in 2021 – downgrading “reducing costs” to the #2 priority.
This enables businesses to benefit from invoice tracking, trend analysis, and detailed reporting without having to invest in in-house AP software or IT infrastructure. Outsourcing providers often use advanced tools and standardized workflows to ensure faster invoice processing and error reduction. Managing AP in-house can distract businesses from critical revenue-generating activities.
Compliance and security
Meanwhile, outsourcing IT service desk functions was the top service exported in the information technology sector globally. In addition, security threats can occur when another party has access to a company’s confidential information and that party suffers a data breach. For instance, signing contracts with other companies may take time and extra effort from a firm’s legal team.
Growth of white-collar outsourcing
It is the combination of a predominant mindset, actions (both big and small) that we all commit to every day, and the underlying processes, programs and systems supporting how work gets done. We bring together passionate problem-solvers, innovative technologies, and full-service capabilities to create opportunity with every insight. KPMG has market-leading alliances with many of the world’s leading software and services vendors. KPMG’s multi-disciplinary approach and deep, practical industry knowledge help clients meet challenges and respond to opportunities. Outsourcing provides significant cost savings and operational efficiency by delegating non-core tasks to external vendors.
But many U.S. companies initially lured to offshore locations like India and the Philippines by bottom-of-the-barrel pricing are also rethinking their strategy. In fact, the nearshore P2P outsourcing segment alone is expected to grow 26% over the next five years. But organizations also need to look beyond the lowest cost to ensure their partner provides significant cost savings while also driving the highest productivity and performance.
Because of outsourcing, many businesses have been able to reduce expenses, gain access to specialized expertise (such as outsourced logistics hr support), improve overall performance, and achieve cost efficiency. Many businesses have successfully adopted outsourcing processes into various aspects of their logistics and supply chain operations. By outsourcing, companies could free up resources (i.e., cash, personnel, facilities) that can be redirected to existing tasks or new projects that deliver higher yields for the company than the outsourced functions. Outsourcing is a business practice in which a company hires a third party to perform tasks, handle what is the turbotax phone number operations or provide services for the company. Some leading organizations combine external providers with internal centers, GCCs, shared services, and flexible models like built-operate-transfer that use insourcing, outsourcing, digital labor, AI, and global business services. First seen as a formal business strategy in 1989, outsourcing is the process of hiring third parties to conduct services that were typically performed by a company itself.
Cash Management
By transferring tasks that would otherwise require additional staff members or equipment, outsourcing can help companies lower costs significantly and minimize in-house business processes and costs. Outsourcing accounts payable can streamline processes, reduce costs, and save time, making it a popular choice for businesses. Suitable clauses in a contract may provide for the outsourced service provider to pay any additional costs which are faced by the client and specify that the provider’s obligation to provide the services is annulled or suspended.
Invoice matching and validation
- We bring together passionate problem-solvers, innovative technologies, and full-service capabilities to create opportunity with every insight.
- Because of outsourcing, many businesses have been able to reduce expenses, gain access to specialized expertise (such as outsourced logistics hr support), improve overall performance, and achieve cost efficiency.
- The CEO risks arrest, and the Japanese company may face a private settlement with financial package in the range between 20 and 100 million JPY ($200,000 – US$1 million).
- Audit trails, digital records, and secure payment processing enhance financial security and reduce the risk of fraud.
- Services are delivered by the member firms; GTIL does not provide services to clients.
- Whether your invoice volumes increase seasonally or grow with business expansion, service providers have the resources to scale up or down seamlessly, ensuring consistent performance.
The practice of handing over control of public services to private enterprises (privatization), even if conducted on a limited, short-term basis, may also be described as outsourcing. The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981 at a time when industrial jobs in the United States were being moved overseas, contributing to the economic and cultural collapse of small, industrial towns. Outsource served approximately 2,000 different businesses and put more than 7,000 people to work in 2022. Services are delivered by the member firms; GTIL does not provide services to clients.
- KPMG is ranked as one of the world’s best outsourcing advisors since the inception of the IAOP rankings.
- Improving quality and automation, cutting costs, gaining access to a more stable pool of qualified talent, and freeing up internal teams for higher-value activities are common drivers.
- The challenge for leaders is no longer whether to outsource, it is how to govern across delivery models in a way that supports business goals, resilience, and continuous transformation.
- When they do this, they’re outsourcing facilities management to another company.
- Companies may outsource their IT needs to a third-party provider, such as an IT consultant or managed service provider (MSP) that they may not have internally.
Whether your invoice volumes increase seasonally or grow with business expansion, service providers have the resources to scale up or down seamlessly, ensuring consistent performance. Outsourcing eliminates the need to hire, train, and maintain in-house AP teams, which reduces labor costs significantly. Use HighRadius’ AP Automation Vendor Evaluation Template to compare outsourcing vs automation options across cost, accuracy, and scalability AP outsourcing providers ensure timely payments to vendors using methods such as ACH, wire transfers, or checks.
Performance measurement
This kind of outsourcing involves IT services, such as web development, application management, software or game development, networking maintenance, and more. LPO is similar to BPO, except the processes involved in legal process outsourcing are exclusive to legal services. Outsourcing is a business practice that involves contracting with a third-party service provider to perform specific tasks or services. This information is intended to prepare business logistics managers to make an informed decision regarding the potential benefits of logistics outsourcing and business process outsourcing services. Companies also could realize that they lose control over aspects of the outsourced tasks or services.
Choosing the Right AP Partner Just Got Easier
With outsourcing, one or more tasks or processes are usually given to an external partner. These can be individual tasks, specific what is a contingent liability areas, or entire business processes. By relying on outsourcing, business processes can become more streamlined and organized.
Globalization and socio-economic implications
Just as companies are different to one another, so too are outsourcing strategies. Simply put, there is no single right approach to outsourcing a project. Do you think that outsourcing is the best strategy for your business, but you don’t know how best to proceed? In contrast, a task given in its entirety to an outside company is known as external outsourcing. For example, if you have given a task to a different area of your company, or to a department which specializes in it, this is commonly known as internal outsourcing. Under certain circumstances, however, some tasks be performed internally (in-house outsourcing).
Company Overview
The outsourcing provider manages manual or automated data entry, ensuring invoices are accurately recorded. In today’s rapidly evolving business environment, effectively managing accounts payable (AP) has become crucial for maintaining healthy cash flow and efficient operations. Those who use outsourcing properly can speed up workflows and improve their products or services, so it is possible to counter the growing absorption costing: income statement & marginal costing video & lesson transcript global competition. In this way, a company can save on storage costs and only has to pay for the material costs during production.
Automation reduces expenses related to paper invoices, manual processing, and payment errors. However, businesses may face challenges such as implementation complexity and integration concerns. With automated dashboards and analytics, finance teams gain real-time insights into payables, helping them make informed financial decisions and optimize working capital.
