Reasons and Advantages Of Invoice Processing Outsourcing

Reasons and Advantages Of Invoice Processing Outsourcing

For companies struggling with backlogs of uncleared and unprocessed invoices, one question is on top of their mind; should we pursue invoice processing outsourcing services? As administrative and back-office tasks accumulate because of either business growth or an increase in invoices, the accounting department has to develop a mechanism of clearing them and streamlining the back-office operations.

If the firm has limited resources, identify how to address the increase in invoice volumes. How will the department handle them? How will the invoices be processed? Do we have the mechanisms to do so? Knowing how to process the increase in invoice volume is vital in ensuring business success.

The invoice personnel tasks, in many firms, aren’t always integrated into a business like other functions such as in operations. Therefore, outsourcing invoice processing is vital and eases some pressure in your accounting department. Although there are some disadvantages of invoice processing outsourcing, the advantages supersede them by far. This article will explain invoice processing outsourcing in detail, outlining why a company may outsource its invoice processing needs.

What is Invoice Process Outsourcing?

Invoice processing outsourcing is a business practice whereby a company subcontracts a third-party company to handle its bill or invoice-related processes. Although the services lists are different, the third-party vendors generally perform purchase order matching, invoice capturing, invoice processing, reporting, and archiving invoice records.

Reasons A Business May Outsource Its Invoice Processing

Considering all this, there are merits and demerits of invoice processing outsourcing. It is of utmost importance to distinguish between the benefits and shortcomings of outsourcing based on your unique situation’s context. Any company seeking to outsource its invoice processing has one or more of the following issues:

Deteriorating Vendor Relationships

Supplier relations must be taken as a customer service approach since the suppliers may (and will) pull their contracts from your firm if they find it hard to work with your company. From defaulting in payments or missing the due dates, the suppliers will contact the business, especially the invoice department, tracking the status of their payments. This uses up the valuable time the invoice team would be processing the payments and due invoices.

Regardless of the circumstance, it is always your fault if a supplier or vendor misses a payment. Sometimes the vendors resend a copy of the same invoice through multiple mediums to ensure they receive their payments. This might result in you double-paying an invoice. However, dedicated invoice processing outsourcing companies like Oworkers use automated mechanisms that can detect when an invoice is sent more than once, preventing you from paying for the same invoice twice.

The Invoice Processing Costs Are Too High for the Company

To manually process a single invoice might cost about $30. However, suppose your company has an inefficient workflow that misappropriated your valuable resources and time, lacks enough communication between various departments for invoice verification, or deals with uncooperative suppliers. In that case, the costs may quickly add up.

Invoice processing has direct, indirect, and hidden costs. When the upper management examines these costs, they immediately become interested in looking at all the available options to reduce these invoices processing costs, including invoice processing outsourcing.

Your Invoice Processing Team Is Overwhelmed by their Workload

It isn’t uncommon for the invoice processing department to be completely overwhelmed by the amount of their workload. This especially happens if the business is experiencing rapid growth, accompanied by increased supplies and consequently invoice volume. Although this is excellent news for your sales department, it exerts more pressure on your invoice processing team.

This usually is the case for paper-based, manual data entry, heavy purchase order-based processes, and chasing down approvals. Every additional invoice increases the load and, after some time, dampens the invoice processing staff’s productivity. Invoice processing outsourcing ensures that your invoice team only receives the reports on invoices after processing. Therefore, they can make solid decisions based on the invoices and effect prompt payments to the vendors, cementing your relationship with them.

When Invoice Processing Outsourcing Is More Economical Than Hiring an In-House Team

Hiring additional full-time employees is a costly undertaking, and sometimes the financial managers may get concerned by the increased costs. Other times, the managers may be just too occupied by their daily obligations, lacking enough time to send out vacancy adverts, vet the recruits, or conduct interviews. The other reason may be manager’s concern regarding the invoice staff turnover.

All the concerns make it appealing to subcontract all or some invoice processing needs. Ironically, this becomes a further invoice. Regardless, invoice process outsourcing may turn out to be a good undertaking because of its immeasurable benefits.

Your process Invoice Processing Lacks Control

Although mistakes are inevitable in manual processes, the business loses a lot of money through duplicate payments. One report revealed that about 0.1%-0.05% of the invoices paid are typically duplicate payments. This might mean millions or hundreds of thousands lost in duplicate payments when you have not instituted the proper controls depending on the business size.

Additionally, late or missed payments burden your staff to correct the wrong by recovering the erroneous spend. In turn, this reduces the available time for processing other invoices. However, hiring an invoice processing firm prevents double payments. The outsourced company deals solely with invoice processing or may combine it with other accounting services. Therefore, they can offer high-quality services to ensure that your business doesn’t suffer losses occasioned by multi-paying an invoice.

The Benefits of Invoice Process Outsourcing

Administrative, Tracking, and Reporting

Because you will pay a third-party some fees to manage and process your invoices, they will offer you reporting and other administrative functions. Outsourced Invoice processing companies can provide you with reporting on invoice costs, time to pay, among other things, and routines like a month- & year-end close, analysis, management of the invoice documents, and reconciliation.

Potentially reduced costs

It can be possible that outsourcing the invoice processing duties might have higher cost-effectiveness than hiring your team and training it. With outsourcing, you don’t incur the pensions, insurance, or even the office equipment and space costs. Therefore, depending on your situation, you may save some money through outsourcing.

Accountability and Uptime

Given that invoice processing is their primary purpose, your invoice processing will get a lot of attention from these professionals. The outsourced company will not mix a CFO’s roles and those of a financial adviser with an Invoice manager and invoice processor, a common practice in smaller companies.

You can have near-uniform uptime based on the supplier’s location or if your company has distributed staff when using invoice processing outsourcing.

Increased Resources

Outsourced Invoice processing solutions typically come equipped with invoice processing automation platforms to handle their workflows. It means they will have the systems for handling purchase order-backed or the non-purchase order process, vendor management, administrative support, and discrepancy resolution.


From the above, it can be noted that there are several reasons why you might decide to outsource your invoice processing. There are several benefits or advantages of invoice processing outsourcing. Besides the benefits above, subcontracting invoice processing increases the accuracy of the reports, increases turnaround time and profits. Leverage invoice processing outsourcing if you see an increase in the number of invoices within your business.

Read also: What Is Invoice Reconciliation?

Reasons and Advantages Of Invoice Processing Outsourcing

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