In-house vs outsourced accounts payable

Key takeaways

Accounts payable outsourcing vs in-house comes down to cost per invoice and control. Processing 600 invoices a month in-house at about 6 minutes each costs roughly £1.85 per invoice for a £28,000 employee. Outsourced at an indicative £12 per hour, it is about £1.20, saving around £4,600 a year, with approvals kept in-house.

• In-house: about £1.85 per invoice at 6 minutes each.
• Outsourced: about £1.20 per invoice at £12 per hour.
• In-house: keep payment approval and release.
• Outsourced: data capture, matching, queries and filing.

What does accounts payable involve?

Accounts payable (AP) is the process of receiving, checking, recording and paying supplier invoices. It covers capturing invoice data, matching to purchase orders or delivery notes, chasing approvals, answering supplier queries and preparing payment runs. Most of it is rules-based, which makes it a strong outsourcing candidate.

• In-house vs outsourcing: which model is more cost-effective?

How do you calculate cost per invoice?

Multiply the minutes per invoice by the loaded cost per minute of whoever does it, then add exceptions and supplier queries. For 600 invoices a month at 6 minutes each, that is 60 hours a month, or 720 hours a year. At £18.45 per worked hour for a £28,000 employee, that is about £13,300, or £1.85 per invoice.

• Work out your cost per task before you outsource

What does outsourced AP cost?

The same 720 hours at an indicative £12 per hour cost about £8,640 a year, or £1.20 per invoice, a saving of about £4,600. Per-invoice pricing is also common for stable volumes. Your approvers still spend time approving, so that part of the cost does not change.

Which AP tasks should stay in-house?

Keep approval and payment release in-house. Outsource the capture, matching, coding suggestions, filing and supplier query handling. This separation of duties is good practice anyway: the person who prepares a payment should not be the person who releases it.

• In-house: approving invoices and releasing payments.
• In-house: approving any change to supplier bank details.
• Outsourced: capture, matching and coding.
• Outsourced: supplier statements and queries.

How do you prevent supplier fraud?

Invoice and bank-detail fraud targets small businesses. Verify any change of supplier bank details by phoning a known number, never one in the email, and require two people to approve the change. The National Cyber Security Centre's small business guide covers the basics of phishing and account security.

• Data security with an outsourced team

Does outsourcing AP help you pay on time?

Usually, because invoices are captured and chased for approval daily rather than when someone has time. Paying on time protects supplier relationships and avoids late payment interest, which suppliers can claim under UK late payment legislation on business-to-business debts.

• Outsourced invoicing and credit control

When should AP stay in-house?

When volumes are small, under a hundred invoices a month, or when invoices need detailed site knowledge to match, such as construction variations. In those cases, the saving is small and the queries would come back to you anyway.

• When is in-house cheaper than outsourcing?

Which AP measures show it is working?

Track a few measures monthly after outsourcing accounts payable. They show whether invoices move quickly and accurately, and whether suppliers are paid on time.

• Cost per invoice processed.
• Days from invoice receipt to approval.
• Share of invoices paid by the due date.
• Exceptions and errors per 100 invoices.

• BPO scorecard and KPIs

What does this look like in practice?

A pattern we see in UK logistics firms: fuel, subcontractor and maintenance invoices arrive by email and post, and the finance lead spends days matching them. A managed team captures and matches invoices daily, and the finance lead only approves exceptions and payment runs.

• See client work
• BPO Solutions for UK businesses

Accounts payable checklist

Use these steps to compare.

• Count invoices per month and time per invoice.
• Calculate in-house cost per invoice.
• Get per-hour and per-invoice quotes.
• Keep approvals and payment release in-house.
• Set a bank-detail change verification rule.
• Track cost per invoice and payment days monthly.

Next step

Send us your monthly invoice volume and current process. We will calculate cost per invoice both ways in a 30-minute call.