Benefits of Outsourcing Accounts Payable in small and lager Business
Small and lager Business can save time and money through the use of outsourced accounts payable. Outsourcing accounts payable is becoming common practice in many small businesses.
When a business has an outsourcing or third party payroll provider, they generally only handle one company's payroll needs. The company chooses which payroll provider they want to work with, signs a contract and pays them on a monthly basis. The third party provides all services needed including: Accounts Payable Services, Financial Management, Payroll Administration and Reporting, General Accounting Services including fixed assets management and accruals. And the costs are often much cheaper than if the business were to do it themselves.
The three main benefits that outsourcing accounts payable can provide to a small business is: Time, Money and Quality. The time that was lost to file a check every month can be saved by having the payroll provider handle it. And when the payroll provider handles it, they can use much cheaper checks than a business could afford themselves. Accounting fees and taxes are not usually included in the price of the payroll services for a third party provider, but other miscellaneous fees may be charged for unused leave time to adjust paychecks or administrative tasks such as re-keying or copying payroll checks into an existing file. This miscellaneous cost will ultimately be paid for by the client.
Quality is a huge benefit of working with a payroll provider. Since the third party payroll company is responsible for the checks, paperwork and files, any mistakes that are made regarding the payroll process won't be done by your employees and will be out of your hands. This can result in money being paid to the wrong person and having to pay back taxes or fines you had no control over. Also, when mistakes are made by a business or their employees on their own payroll, there isn't much an employer can do to stop it. But when mistakes are made by the payroll company, there will be consequences that the company must deal with. The third party provider may fire the employee making mistakes or let them go out of guilt for not finding a solution for the mistakes sooner. This way, the business is not affected and there is no risk to lose an employee because of their mistakes.
Another benefit to outsourcing accounts payable is the cost. Compared to running your own payroll and handling your own A/P department, a small business can save up to 50% on payroll costs each year by choosing a third party provider. Outsourcing accounts payable to a third party provider has become so popular over the last few years, because it saves time and money. And, another reason businesses choose to have a third party provider handle their A/P process is because they can save money on other aspects, such as consultants and employee training. Money saving ideas are also commonly given out by the payroll company, as well as help with tax deductions.
When companies choose to outsource their accounts payable department, there are a few things that will be different from what they would be if the company was handling their own A/P department. One of these changes will involve the physical location of where the work is done. The third party providers will typically have their own accounting departments that handle all accounts payable and payroll up to a certain dollar amount. If it is over that amount, they would hire a separate firm to work on the accounts payable process. But, this is rare in the hiring of outside firms. The companies that do not qualify for outsourcing usually manage accounts payable in house by having an A/P clerk who handles the entire process.
Another change involves the team of people involved with the entire Accounting/A/P department. When outsourcing, there may be two or three checks filed each month instead of one like before and a credit card payment system may be used, rather than using checks all the time. Once a third party provider is hired, they will begin working on changes to the corporate credit card. The main A/P clerk will be in charge of managing these changes and then the additional duties that are added to their job. For example, once the checks are being filed with a credit card payment system, an additional clerk may need to be hired that is also responsible for monitoring the system. This way, any problems or issues can be fixed immediately and payroll can continue uninterrupted. With outsourcing accounts payable, companies usually have a larger team working on their accounts payable department than if it were in house employees or the A/P clerk.
As stated above, there are many benefits of outsourcing accounts payable to a third party provider. However, there are a few negatives to outsourcing this process. The first negative is the amount of time that is spent working on the external payroll company. Many companies have employees that handle the payroll for one business and may now have to transfer over to work for another business as well. This can be very frustrating for these employees and hard on their work ethics. Based on this, third party cash handling providers may want to find a good relationship with the client's internal accounting departments before hiring them out. This way they can cut down on the amount of time spent working with a brand new client.
Another negative to outsourcing the payroll process is that a company has less control over the process. For example, if an employee goes on vacation, and the third party provider has not updated their vacation to their records, it could result in an overpayment to that employee which will need immediate attention from them. This is usually not a major problem if the client is with one payroll provider for many years, but for new clients who have just started a relationship with a new payroll provider, there may be some issues at first. This can lead to issues in switching providers if there are any problems or mistakes made by either party in the early stages of working together.
In conclusion, there are many benefits of outsourcing accounts payable to a third party provider. But, there are also a few negatives that come along with this. Figure out which option is best for your company and go with it! Be sure to look into the benefits and negatives of both options before making your decision!
Part II: What to Look For in Accounts Payable
Below is a list of the top five main things that need to be considered when choosing an A/P provider:
1. Is their software easy to use? - The software offered by these third party payroll companies should be really easy to use.
Conclusion: If the software is hard to use, then chances are it will not be used.
2. Does their software integrate well with the rest of your accounting system? - For example, if they offer a different type of check writing system that is easier to use, then this will enhance your overall accounting system and make it more user friendly.
Conclusion: If the software has too many features that are not needed, then it will be harder to learn. That is why when choosing a payroll provider they should only have necessary features and should be easy to work with overall.
3.
Post a Comment