Outsource Accounts Payable: Pros, Cons, and Small Business Cost Guide

Key takeaways

• Weigh the pros and cons of outsourcing accounts payable before you hand off your bill-paying operations.
• Recognize the signs you may need help, like frequent errors, rising costs, or an overwhelmed team.
• Compare outsourcing against AP automation software, which keeps control in-house while cutting manual work.
• Digitize your accounts payable first to reduce errors and costs, then revisit outsourcing as you grow.

What exactly is accounts payable?

Accounts payable (AP) is all the money your business owes to vendors and suppliers. It covers bills like rent, taxes, utilities, and supplies you haven’t paid for yet. So what is accounts payable in practice? When it’s managed well, there’s always enough set aside to pay every bill, and your invoices stay correctly documented.

Many business owners ask: is accounts payable an expense? Technically, AP is recorded as a liability, not an expense, because it reflects what you owe rather than what you’ve already paid.

It’s also important to understand accounts payable vs accounts receivable: AP tracks what you owe vendors, while AR tracks what customers owe you.

What is accounts payable outsourcing?

Accounts payable outsourcing is hiring a third party to manage your bill-paying operations. That includes invoice processing, approvals, vendor payments, and record-keeping.

Instead of your team handling every bill, an outside provider takes over the day-to-day work. Some providers use their own software and staff, so you get both people and technology in one package.

It’s different from basic bookkeeping. Bookkeeping records what already happened, while AP outsourcing actively manages your payments as they come due.

Why outsource accounts payable?

As your business grows, managing AP gets harder. That’s often the point to bring in a professional or one online solution to manage the books, invoices, and payments.

Outsourcing AP can cut errors, add better technology, and free up your time. Here’s why businesses make the switch:

Why keep accounts payable in-house?

When it comes to small business accounts payable processes, many owners prefer to stay hands-on so they can directly oversee vendor relationships and payment timing. It makes sense that the person who talks to the vendors on a daily basis would be the one to handle invoices and payments. That way, you can build strong relationships and know exactly what is owed, and when.

Here are the top three reasons to keep AP in-house:

How much does it cost to outsource accounts payable?

The cost of outsourcing accounts payable depends on your invoice volume and the services you need. Small businesses often pay a set monthly fee or a price per invoice.

Providers usually price in one of two ways. Some charge per invoice they process. Others charge a flat monthly rate that covers a bundle of tasks like invoice entry, approvals, and payments.

Compare that to the cost of doing AP in-house. You’re paying for staff time, software, training, and the errors that slip through manual work. For many small businesses, outsourcing costs less than hiring and training a dedicated AP person.

Accounts payable outsourcing vs. AP automation

Outsourcing and AP automation solve the same problem in different ways. Outsourcing hands the work to people outside your business. Automation gives your own team software that does the heavy lifting.

With outsourcing, a provider manages your invoices and payments for you. With automation, you keep AP in-house but replace manual data entry and paper checks with a digital tool.

Many small businesses find that automating AP gives them the speed and accuracy of outsourcing while keeping control in-house. You can pay vendors online, set approvals, and sync with your accounting software, all from one place.

So, should you outsource accounts payable?

Your choice often comes down to evaluating common accounts payable problems and solutions—whether you’d rather solve process issues internally or hand them to a specialist. Both options have trade-offs. In the end, it comes down to how comfortable you are trusting someone outside your organization with your money.

If you’re still not sure about outsourcing, you can try managing the AP process yourself, by digitizing it. This allows you to keep it in-house while reducing human error and costs.

Accounts payable outsourcing FAQs