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A/P Outsourcing

Would like to hear thoughts on how to properly price an A/P outsourcing model. Speaking to a specific firm, and the hourly rate they are extending out to an annualized fee feels too rich. A quick Google search shows cheaper options, but this firm comes recommended and I am more concerned with service delivery and quality. Will push back on price naturally, but I am interested in the collective Proformative group's experience.

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

If the recommendations come from trusted sources, that information has high value. AP is such a critical function that an error could cause so many problems for your firm. Going for the lowest priced vendor may not be the best option. With an outsourced model I would always consider the cost for you of building the AP function internally vs. the total cost of outsourcing this function. That is where you should fully see the savings.

If hiring an AP person will cost $65,000 (salary + benefits); and outsourcing will cost $40,0000 - you should outsource to save $25,000. However, as soon as the price of outsourcing begins to approach the cost of hiring an AP person, consider bringing the function back in-house.

Hope that helps.

Jeremy Slaughter
Title: Client Partner, Principal
Company: Tikvah Group, LLC
LinkedIn Profile
(Client Partner, Principal, Tikvah Group, LLC) |

Outsourcing your A/P can be successful, but I think concern with cost is the tip of the iceberg when considering this option. Obviously your employee cost would include taxes and insurance, but may also include added cost for the system/module and other materials and supplies.

Next, what is the cost of integration to get all the data produced by the firm into your system? Are there audit controls in place if the IRS knocks at your door? Is the information readily available for audit? When our firm works with clients we always make it a point to address all the risk factors possible so we are adding value overall and long-term rather than detracting due to short-term vision or limited scope. Not all data is created equal nor does it always integrate without custom solutions.

You should also review the internal processes of the firm you are looking at for this function. We are big on process because it is a differentiator and value for customers, vendors and other business partners. Consistency is key in A/P. I hope this adds value to the process you are in right now.

Cheers,

Jeremy

Andrew Nussbaum
Title: Director of Finance and Adminstration
Company: **--**--**
(Director of Finance and Adminstration, **--**--**) |

Ken S.
We recently moved to a virtual A/P processor (rhymes with "still") -- we did the analysis whether to keep in-house and found the virtual much more cost effective.
We are a smaller N/P orgn ($5m), so every $ counts.

We are now saving countless hours, cost, and frustrations by having this outsource solution.

Interface is pretty straightforward, allows multiple approvers, splits, and many other useful features.

Hope this helps.

-AN

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