CEO & Founder of Fig Loans
Director of Marketing at Comfort Temp
COO at AAA State of Play
Chief Acquisitions Officer of Amerinote Xchange
Head of GTM at OpStart
Accounts payable (AP) processing has traditionally been paper-heavy and done manually, and for many companies, it still is.
Recent findings from the Institute of Financial Operations and Leadership (IFOL) report Accounts Payable Automation Trends 2025 show that 63% of AP teams spend more than 10 hours per week on invoice processing, up from 52% in 2024.
Another 66% manually enter invoice data into their enterprise resource planning (ERP) systems, a 6% increase from the previous year.
However, with the rise of technology, leaders have two distinct modernization paths: invest in automation to strengthen in-house processing or turn to accounts payable outsourcing for expert support.
The choice is less about “right or wrong” and more about which model best fits a company’s unique goals and structure.
Every product a company sells or every service it delivers depends on a complex network of payments to suppliers, contractors, or service providers.
Accounts payable is the operational engine that ensures these responsibilities are met accurately and on time.
The following sections examine its components and the processing approaches for AP teams. Understanding them is the first step towards choosing the best management strategy for your company.
Accounts payable is an accounting term that describes a company’s short-term obligation to pay for goods or services purchased from other vendors.
The item, received but not yet paid for, is recorded as a liability on the balance sheet until the payment is made.
The most common example of accounts payable is a supplier invoice, where a company purchases materials or inventory on credit.
Other AP obligations include payments to contractors, subscription services billed after use, utility bills, professional fees for legal or consulting work, and periodic maintenance costs for equipment or facilities.
Businesses use accounts payable to optimize cash flow by taking advantage of standard payment terms of 30, 45, 60, or 90 days.
Accounts payable responsibilities are complex and extend far beyond paying bills on time.
They also include processing and tracking invoices, verifying payments, reconciling statements, ensuring accuracy, and maintaining detailed audit records.
How a company manages them directly impacts its long-term financial resilience.
Efficient management preserves working capital for operational needs while maintaining supplier relationships through consistent payment practices.
Conversely, poor administration can cause late payments, strained supplier relationships, missed early payment discounts, or even risk overdrawing accounts.
The thin line between these two outcomes lies in choosing the best approach that fits the company’s needs.
There are two main ways to manage accounts payable:
Both approaches come with advantages and disadvantages, and their use depends on operational needs, budget, and control preferences.
Accounts payable outsourcing means delegating AP functions to an external service provider. Instead of managing payments internally, companies partner with specialized vendors who handle the entire process on their behalf.
This approach is part of a broader trend in which employers increasingly turn to external partners to take over operational functions.
Gallup’s 2024 Global Outsourcing survey shows that the process remains a significant part of their workflow, with 40% of respondents planning to increase investments.
Relying on professional employment organizations, third-party payroll companies, or staffing firms is a common strategy to reduce administrative burden.
In fact, BPO statistics show that 52% of executives outsource business functions, while 37% outsource accounting.
For accounts payable specifically, Jeffrey Zhou, CEO and Founder of Fig Loans, explains that more companies are leaning toward outsourcing because, “the upside is hard to ignore”, citing greater efficiency, fewer errors, and the ability to free up internal teams for more strategic work.
“In today’s fast-moving business world, that balance of reduced workload and added expertise is exactly why outsourcing is becoming the smarter path for many organizations,” concludes Zhou.
Accounts payable outsourcing services typically handle the end-to-end AP workflow, including receiving and processing invoices, entering and coding data, matching invoices to purchase orders, routing them for approvals, communicating with vendors, and executing payments.
Many providers offer additional support such as compliance checks and ERP integration, ensuring accuracy, efficiency, and scalability across the AP function.
From the company’s perspective, the process is predominantly hands-off, with leadership maintaining oversight through dashboards and reporting.
Outsourcing accounts payable services allows companies to shift from managing a transactional function to overseeing a strategic business operation.
By entrusting the day-to-day execution to specialized providers, they gain a more structured process that runs smoothly in the background while leadership maintains visibility and control.
However, beyond its unmistakable efficacy, the benefits also expand to better costs, scalability, accuracy, and compliance.
One of the most compelling advantages of accounts payable outsourcing is transforming variable costs into predictable, fixed service fees.
At the same time, it reduces operational expenses by eliminating the need for additional hires, minimizing errors, and improving efficiency.
“When we shifted from in-house AP to outsourcing, the biggest change I noticed was focus—my team no longer spent hours chasing invoices and could redirect that time to strategy and growth,” explains Abby Shemesh, Chief Acquisitions Officer of Amerinote Xchange.
“The cost comparison went beyond salaries; outsourcing eliminated hidden expenses like software, training, and turnover,” says Shemesh.
These savings compound over time as providers continuously optimize their processes and technology investments without requiring additional investment.
A recent Gartner survey reveals that one-third of accountants make at least a few financial errors every week due to capacity constraints, with 18% making errors at least daily.
Overworked teams are more prone to mistakes, which can compound rapidly.
Accounts payable outsourcing providers invest heavily in cutting-edge technology that most companies cannot implement internally. These automated tools significantly reduce human error and speed up the entire process.
In addition, while automation handles invoice matching or approval routing, experienced professionals still oversee the process. This combination is efficient and reliable, giving businesses confidence in the accuracy of their financial operations.
With fewer mistakes, companies also build stronger supplier relationships. Vendors are paid correctly and on time, reinforcing trust and potentially leading to more favorable terms.
“The biggest operational difference with outsourced AP is speed of strategic pivots,” says Maurina Venturelli, head of GTM at OpStart.
Business growth, product launches, seasonal fluctuations, and economic cycles create significant challenges for in-house AP operations.
However, when companies outsource these services, the third-party provider adjusts resources and technology to meet changing demand.
“When we needed to rapidly scale vendor relationships during high-growth phases, outsourced teams could onboard new suppliers in days versus weeks with internal teams bogged down by approval chains,” adds Venturelli.
This flexibility allows the business to expand without worrying about capacity constraints or additional hiring.
Another significant advantage of outsourcing accounts payable services is the ability to implement multiple layers of protection against fraud and compliance risks that exceed what most companies can develop internally.
A reliable provider sets up clear approval hierarchies and monitors transactions for unusual activity. They also stay current with tax and reporting requirements, helping businesses avoid penalties and maintain compliance without extensive internal oversight.
Despite the many benefits of accounts payable outsourcing, companies must consider several potential disadvantages before making this strategic decision.
Understanding these challenges helps ensure realistic expectations and an easier transition.
Transferring accounts payable operations to an external provider results in reduced direct control over processes that have traditionally been managed in-house.
Changes and adjustments that internal teams could once make quickly may now require formal change requests and implementation timelines, potentially delaying critical business actions.
Communication adds another layer of complexity as leadership no longer interacts directly with employees but must coordinate through external account managers or service representatives.
For employers accustomed to direct oversight, these challenges can create blind spots in monitoring financial operations.
“The biggest risk is losing the financial pulse of your business“, says Maurina Venturelli.
“Some founders get so hands-off they miss early warning signs like unusual vendor payment patterns or duplicate charges that signal deeper operational issues.”
Venturelli suggests working with a provider that provides real-time visibility, not just monthly summaries, as a potential solution to this problem.
Accounts payable involves sensitive financial information, and outsourcing introduces an additional layer of risk. Therefore, sharing data with an external provider can raise concerns about confidentiality and protection against breaches.
While many providers have strong safeguards, businesses still need to carefully evaluate security standards and ensure contracts clearly define accounts payable responsibilities for data protection. Any shortcomings in these areas could expose confidential financial information.
Moving from internal to outsourced AP can create short-term disruption.
In the early stages, errors can occur simply because the internal team and the provider are not yet fully aligned. For example, a supplier might continue sending invoices to an old email address, or approval delays may happen if workflows are unclear.
Christy Robinson, Director of Marketing at Comfort Temp, specifies that the overlap of technology infrastructure is a hidden cost most businesses miss.
“During our system integrations, I found we were already paying for AP capabilities in our existing ERP that would essentially go unused if outsourced, creating a 12-15% cost penalty that wasn’t obvious in initial comparisons.”
Although these issues are usually temporary and can be easily avoided, they highlight the importance of preparing with a clear transition plan and regular check-ins.
Managing accounts payable in-house means a company handles all payment operations internally, either manually or by using software to automate the process.
Both approaches have their advantages and disadvantages, which make them suitable for different business priorities.
Manual processing involves staff physically reviewing invoices, entering data into accounting systems, or issuing payments.
Automated processing leverages AP software solutions to simplify invoice capture, coding, approval workflows, and payment execution. Companies may also use vendor management software to maintain organized supplier records, which supports accurate invoice handling and helps AP staff confirm that payments align with the correct vendors.
Of the two, leveraging technology has proven to be the more effective approach.
According to the 2023 report Accounts Payable and Receivable Trends: What’s Next in Automation, fully automating AP drives higher vendor satisfaction, with 74% of mid-sized firms reporting improvement compared to 40% for only partial automation.
Still, even with the right technology, in-house AP processing can become a constraint for companies with high invoice volumes or limited staff resources, which often drives them to explore alternative solutions, including outsourcing.
Manual AP management is best for companies that want complete control and hands-on oversight. It can work well for small teams with low invoice volumes, where personalized oversight adds value.
Automated AP management better fits growing teams that prioritize speed and scalability.
Deciding how to manage accounts payable is a strategic choice far beyond administration.
For Lacey Jarvis, COO at AAA State of Play, the most significant difference is how much control companies want to keep versus how much efficiency they need.
“With an in-house team, you can see every detail and quickly fix mistakes while shaping the process to fit your business.
Outsourced AP takes the heavy lifting off your plate, offering speed, automation, and support that help things run smoothly without draining your team’s time,” says Jarvis.
While each approach has distinct strengths, the differences become most apparent when viewed side by side.
The table below contrasts manual, automated, and outsourced accounts payable services across factors such as cost, scalability, and overall performance.
| Manual Processing Systems | Automated In-House Solutions | Outsourced AP Services | |
|---|---|---|---|
| Control | The AP team oversees every transaction directly | Automation handles tasks, but employees can intervene | Provider manages AP with leadership visibility over the process |
| Efficiency | Processing is slow and labor-intensive | Automation speeds up approvals and payments | Provider streamlines the complete AP cycle |
| Scalability | More complicated to manage as the invoice volume grows | Can scale with increasing invoice volumes | Handles large volumes without increasing internal resources |
| Accuracy | Prone to human error due to manual entry and processing | Automation reduces mistakes | Combines automation and provider expertise for reliable accuracy |
| Cost | Ongoing staff costs increase with workload | Requires upfront investment in software and training | Service fees replace the need for extra staff or infrastructure |
| Visibility & Reporting | Reporting is slower and manual | The software usually offers real-time dashboards | The third-party provider delivers detailed reports and insights |
Cost is a key concern with AP management because every invoice involves the payment and the time, labor, and resources required to process it.
Despite saving on technology and external hiring, manual in-house processing is still a costly alternative.
Ardent Partners’ State of ePayables report shows that, on average, manually handling a single invoice costs around $13, while other sources put the costs between $15 and $40 per invoice.
Even with such high estimates, this data does not account for potential errors, duplicate payments, or missed early-payment discounts. In addition, as invoice volumes increase, companies often need additional staff or overtime, which further drives up costs and makes manual processing less sustainable for growing organizations.
With automation, internal processing cost decreases.
The Accounts Payable and Receivable Trends report we referenced earlier shows that 84% of companies with fully automated AP have experienced increased savings, cash flow, and growth.
Using the right technology speeds up approvals, minimizes errors, and helps capture early-payment discounts.
However, it also requires an upfront investment in software implementation and staff training. These expenditures can increase even further, particularly with system upgrades and the need for continuous support.
Outsourcing accounts payable offers a predictable cost structure and often reduces total expenses.
Service fees replace the need for additional internal staff and infrastructure, while providers use automation and expertise to speed processing, reduce errors, and improve cash flow management.
Outsourcing can deliver significant cost savings compared to manual and, sometimes, automated in-house approaches while allowing internal teams to focus on strategic initiatives.
Companies outsource accounts payable when internal resources can no longer meet demand. Rapid growth can overwhelm AP departments with invoices, slowing payments and straining staff capacity.
A lack of expertise or the need to control costs can also drive this shift, as outsourcing helps lower expenses and minimize errors.
Still, the transition should be approached carefully instead of being rushed.
The first step is evaluating potential providers thoroughly based on proven experience and industry expertise.
Once a partner is selected, it is essential to define clear roles and responsibilities internally so that employees understand how workflows will change and where accountability lies.
Finally, to ensure continued alignment, companies should set clear expectations for performance from the beginning (e.g., invoice processing times, accuracy rates, error thresholds, compliance standards). These expectations must be measurable and supported by regular reporting and review mechanisms.
Handled carefully, the move from internal to outsourced AP turns a process weighed down by errors and inefficiencies into a reliable operation that contributes directly to business performance.
The days of fully manual accounts payable are behind us, as businesses seek faster, more reliable ways to manage their finances.
Both automation and outsourcing deliver comparable benefits, including streamlined processing, improved accuracy, and better visibility into cash flow.
The choice comes down to control and resource allocation.
Automation keeps AP in-house, allowing leadership to maintain oversight, while outsourcing hands responsibility to a specialized provider, freeing internal teams to focus on higher-value work.
For companies comfortable trading some control for efficiency and scalability, accounts payable outsourcing offers a strategic path forward.
Content Writer at Shortlister
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