In-house vs. accounts payable outsourcing: which is right for your business?
Key takeaways:
Accounts payable is about more than paying bills. It shapes cash flow, reporting, and vendor relationships.
In-house accounts payable works best when invoice volume is low, steady, and simple to manage.
Outsourced accounts payable makes sense when invoice payment and tracking is taking too much time for leaders or overloaded staff.
Growing organizations often need stronger accounts payable systems before they’re ready to hire full time, which make outsourcing ideal.
The right accounts payable model can be determined by looking at current capacity, approval process, and growth goals.
Myth: Accounts payable is as simple as writing a few checks
If you’re a business or nonprofit leader, you’re familiar with the basics of accounts payable: receiving bills, reviewing invoices, getting approvals where necessary, paying vendors, and keeping the financial records clean. Or at least that’s what accounts payable is in a perfect world.
In the real world, accounts payable gets messy fast. Approvals get stuck. Vendors have questions that have to be answered by leadership. Payments get made without the balance to cover them. Invoices come in through different channels and fall through the cracks. Tracking is inconsistent which makes reporting difficult.
The question is, how best to handle that reality? For some organizations, the answer is to build out an accounts payable team in-house. For others, it’s easier and more reliable to outsource. There’s no right answer. Just what’s best for your unique business. And, your answer may change as your business evolves and grows.
What in-house and outsourced really mean
The first step in making the decision is to truly understand your options and understand that the choice isn’t all or nothing between in-house and outsourced.
When we talk about in-house accounts payable, we mean that all accounts payable processes are taken care of by your company’s direct employees. It might be a dedicated individual, team, or the responsibility could be spread across a variety of people in a smaller organization.
When we talk about outsourced accounts payable, we’re really talking about a spectrum of outside support. You could still have a team of direct employees that is responsible for accounts payable, but an outside consultant might support them with high-level strategy. Or, conversely, your in-house team could handle high-level strategy while your outsourced support takes care of day-to-day labor. And finally, you could have an outsourced team that takes care of 100 percent of your accounts payable tasks so your in-house team never has to spend time or energy on it.
But how to place your company properly on that spectrum? The decision has a lot to do with your business size, transaction volume, internal capacity, vendor complexity, and the amount of visibility you’d like to have into cash flow and cost allocation.
Where in-house accounts payable works best
Keeping accounts payable works best when your organization has the capacity to to create and/or manage a process that is clear and consistent.
Your invoice volume is low and steady
If your business or organization receives a small number of predictable invoices each month, it’s easier for in-house team members to keep track of accounts payable.
You already have a capable internal finance leader or bookkeeper
If you already have an experienced bookkeeper or financial leader on your team with the bandwidth to cover accounts payable, that might be your simplest path. Just make sure they have aptitude and the available time to handle realistic requirements around vendor management, invoice approval processes, and payment tracking and timing.
Your approval process is simple
Keeping accounts payable in house makes more sense if you have a straightforward approval process that doesn’t involve multiple departments, grant codes, project managers or budget owners.
You already have systems in place that are performing well
As they say, there’s no point in reinventing the wheel. If you have systems in place that are serving you well, there may be no urgent need to change. Just keep in mind that performing well for maintenance is different than performing well for continuing company growth. (More on that below.)
The key is capacity. If accounts payable is being handled accurately and consistently, without pulling leadership away from higher-value work, in-house accounts payable is likely the right solution for you.
If, however, accounts payable depends on one overloaded person, is scattered across departments, or regularly causes confusion and cash flow issues, it’s probably time to look for some outside support.
Where accounts payable outsourcing makes more sense
Accounts payable outsourcing usually makes the most sense when companies and organizations are still too small to support a robust financial team and/or during times of transition when expert support can help install strategies and procedures that maintain stability while supporting growth.
These are some common signs that it might be time to consider outsourcing accounts payable:
Accounts payable is taking too much time for owners or leaders
If leadership is constantly chasing invoices, answering vendor questions, spending time approving routine bills, or managing cash flow emergencies, you know your capacity isn’t rising to your accounts payable needs.
Invoices are being paid late or not at all
When invoices are consistently being paid late or not at all, it’s not necessarily because of a low bank account balance. An inefficient accounts payable process (or none at all) could be at fault . Seeking support from an outsourced accounts payable expert can help you tame the invoice chaos with clean intake and tracking processes.
Approvals are inconsistent or slow
If invoice approvals are piling up on leaders’ desks causing late payments, vendor complaints, and cash flow issues, it’s probably time to bring in some outside help. Better processes consolidate and simplify approval processes to reduce friction and increase efficiency.
You’re relying solely on that one person who usually finds a way to handle it
Often as organizations grow, there are a handful of people who are good at wearing different hats. They’re invaluable at closing the gaps during transitions. But they’re also a point of risk. If they leave the organization or finally hit a point where they can’t keep up with everything that’s landed on their desk, accounts payable can fall through the cracks.
You want stronger controls without the commitment of a full-time hire
If you’re a forward thinking business or nonprofit leader, you’re probably looking to the future. That means putting systems in place early that will support your growth long term. The trouble is there’s not always the budget to hire the experts to build those systems full time. That’s where outsourced accounts payable expertise can help you build while maintaining financial flexibility.
You’re growing fast and feeling the strain
If you’re in a high growth period, your accounts payable are likely increasing in volume and complexity. New grants, projects, locations, departments, vendors or service lines each add a new dimension to your accounts payable process. Bringing in an outsourced accounts payable expert lets you navigate these changes with confidence.
In-house vs outsourced account payable: a quick comparison
| Business factor | Choose in-house | Choose outsourced |
|---|---|---|
| Invoice volume | You receive a low, steady number of invoices each month. | Volume is growing, unpredictable, or already more than your team can manage. |
| Invoice complexity | Most invoices are straightforward, recurring, and easy to code. | Invoices need to be coded by job, department, grant, location, vendor type, or other categories. |
| Payment punctuality | Payments are consistently made on time without last-minute scrambling. | Late payments and missed invoices are common. |
| Vendor relationships | You prioritize personal, local vendor relationships handled directly. | Vendor questions, reminders, and follow-ups are pulling leaders and staff away from other work. |
| Current staffing | You already have a capable bookkeeper, finance leader, or admin team that are managing accounts payable well. | Accounts payable is sitting with an overloaded employee or scattered across several people. |
| Capacity to hire | You have the budget and need for a dedicated in-house accounts payable specialist. | You need more accounts payable coverage, but hiring a full-time employee doesn’t make sense financially or strategically yet. |
| Growth goals | Your current accounts payable process can support where your organization is today and where it’s headed next. | You’re growing faster than your current accounts payable processes can keep up. |
| Approval complexity | Invoices are reviewed and approved quickly. | Invoices are regularly delayed due to slow approval processes. |
| Existing systems | Your accounts payable tools, workflows, and documentation are working well. | Your process is scattered, difficult to track, and not able to scale with your planned growth. |
| Leader involvement | Leaders only step in for true exceptions, review, or strategic decisions. | Leaders are spending significant time chasing invoices, answering routine questions, and fixing accounts payable problems. |
Outsourcing is simple with Aerial’s accounts payable team
If you found yourself checking more boxes in the outsourcing column in the comparison chart above, we’d love to have a conversation with you.
Our team of experienced, skilled accounts payable professionals is passionate about finding the right way to collaborate with your in-house team. Whether you’re needing temporary strategic support to set your organization up for success during a transition or need day-to-day logistics support to take some weight off your staff, we’ll take the stress out of accounts payable. Schedule a call here.
And, that’s not all we do. We provide comprehensive financial support with a special emphasis on manufacturing, construction, and nonprofits.
