Accounts payable outsourcing: What it is, pros & cons, and alternatives

It’s the end of the month, and your desk is buried in a mountain of invoices. You’ve got vendors crowding your inbox wondering about payments, colleagues dropping by every five minutes to see if you’ve “had a second to process that approval?,” and the junior accountant just flagged another error in a payment batch. If this sounds familiar, it might be time to consider accounts payable outsourcing.

In this article, we’ll cover everything you need to know about using accounts payable outsourcing services: the pros, cons, and why it might be the answer if you’re struggling to stay on top of invoices and payments.

What is accounts payable outsourcing?

Accounts payable (AP) outsourcing is the process of hiring a third-party provider to handle your business’s AP tasks. In practical terms, that means that work associated with invoice processing, vendor payments, and compliance is handled by a dedicated accounts payable outsourcing company rather than by a member of your finance team. 

Passing AP tasks to trusted accounts payable outsourcing companies can help your business focus on growth by allowing your finance team to focus on strategic, high-impact projects rather than routine administrative tasks like:

• Invoice processing: Handling and organizing incoming invoices for approval and payment
• Vendor management: Coordinating with vendors, monitoring payment terms, and resolving disputes 
• Payment processing: Ensuring timely payments to vendors and suppliers
• Expense reporting: Tracking and documenting company expenses for expense reporting
• Compliance: Ensuring that AP processes meet legal requirements or regulatory standards 

Why you may need accounts payable outsourcing

If your finance team spends more time worrying about AP processes than working on core business activities, it may be time to consider handing them off to a third-party partner. Below are some of the most common reasons why companies choose to work with an outsourcing provider for accounts payable.

Handling high invoice volumes

Companies dealing with hundreds of invoices can struggle to stay on top of accounts payable with manual invoice processing. Managing them manually can increase the odds of an expensive data entry mistake or other human error, while outsourcing accounts payable services reduces your administrative load and keeps invoice processing consistent.

Managing multi-currency and global payments

Businesses operating internationally need to navigate multi-currency payments and complex tax compliance rules. An accounts payable outsourcing company that handles global payments can provide local compliance expertise and manage currency conversions to achieve favorable rates. 

Streamlining processes for rapid growth

A rapidly expanding business may find that its in-house AP processing can’t keep up. Outsourcing offers access to scalable AP support without the need to hire and train additional staff. 

Transitioning to digital and paperless processes

Eliminating traditional, paper-based AP workflows can go a long way toward improving operational efficiency. AP outsourcing services can include features like digital invoice processing and automated document storage to cut down hard copy records.  

What are the advantages of outsourcing accounts payable?

Outsourcing accounts payable is about more than cutting costs. It’s about making AP processing faster, more accurate, and easier to manage. Businesses that struggle with manual processes, growing workloads, and compliance gaps can benefit from passing the baton to professionals specialized in managing AP. Some of the more common benefits of AP outsourcing include:

1. Cost efficiency

Outsourcing can reduce processing costs by eliminating the need for an in-house AP staff.  It’s important, however, to compare pricing structures, as per-invoice fees can stack up quickly depending on the volume of invoices you handle.

2. Accuracy and efficiency

Unlike your in-house employees, whose responsibilities may span multiple focus areas, AP outsourcing companies focus on one thing and one thing only: accounts payable. Their extensive, highly specific experience can translate into fewer errors. Some firms may also use AP automation for smoother, more reliable invoice processing workflows.

3. Focus on core business activities

When you remove AP processing from your team’s plate, you create space for growth, strategy, and revenue-generating work instead of routine invoice processing and payment tasks.

4. Scalability and flexibility

If your business’s transaction volume changes, an AP outsourcing company can scale up or down without the need for additional hiring or complex restructuring. This can be a major plus for small businesses looking forward to a growth spurt. 

5. Enhanced compliance and risk management

Third-party professionals take responsibility for ensuring that payments follow regulatory standards and that invoices meet accounting requirements. While this doesn’t eliminate the risk of fraud, late payments, or tax penalties altogether, it provides an extra layer of protection in the form of expertise. Some firms also offer built-in audit trails for extra compliance monitoring.

What are the drawbacks of accounts payable outsourcing?

Every business decision comes with trade-offs, and it’s important to understand the potential risks associated with outsourcing accounts payable to a third-party provider, like changes to control, data security, and finance visibility.

1. Loss of control over internal processes

When you hand over a function to an outside professional, you typically sacrifice direct control over the day-to-day of specific activities. In the case of accounts payable, that means you’ll rely on an external team for invoice approvals, payment processing, and error resolution, which can slow down decision-making and complicate vendor relations.

If your AP processing company follows rigid workflows or has different priorities, you may experience delays that lead to vendor disputes. If your business runs on flexibility and frequently makes real-time adjustments, AP outsourcing may lead to more headaches than peace of mind as the processor struggles to keep up.

2. Data security and privacy risks

Outsourcing your accounts payable means sharing information like financial records, vendor details, and payment data with a third party—one that might not apply the same data security standards as your business. If your provider has weak security protocols, you might be at risk of data privacy and compliance violations or even fraud. 

Industries like healthcare or finance that are subject to strict regulatory requirements might find outsourcing too challenging compared to AP automation, which allows your business to apply its own data privacy and security protocols.

3. Communication challenges

Partnering with an AP outsourcing company necessarily means adding a layer of communication between your finance team and your vendors. Even in a best-case scenario where everyone is on the ball, this means extra time to answer questions or resolve issues. 

If your business and your accounts payable provider fall out of alignment, small problems like delays in response times, misaligned workflows, time zone confusion, or differences in service-level agreements (SLAs) can mushroom into big problems: missed payments, duplicate invoices, and even vendor disputes.   

4. Transition challenges

Moving AP processes to an external provider doesn’t happen overnight, and you’ll need to budget the time and capital for a transition period. In addition to training staff on new policies and procedures, you’ll want to account for extra time for integrating systems and adapting to new workflows. Employees used to in-house processes may also struggle with new approval structures and dependencies with an external team.

Poor onboarding isn’t just frustrating and time-consuming; it carries the risk of delays, errors, and compliance gaps. 

5. Lack of visibility on both sides

Outsourcing can limit your real-time access to financial data, including information like invoice statuses and payment schedules. If an issue arises, like a missed payment or a duplicate invoice, untangling what went wrong can take time. This can damage vendor relationships and negatively impact cash flow. Without real-time tracking, your business may also find it challenging to take a proactive approach to managing accounts payable. 

Accounts payable outsourcing vs. accounts payable automation

Accounts payable automation and accounts payable outsourcing can both help your business manage AP processes more efficiently, but they work in different ways. Outsourcing involves partnering with an external professional or service provider who takes over tasks like invoice processing, vendor management, and payment approvals. 

AP automation software, on the other hand, keeps this work in-house but streamlines the process by assigning it to a specialized digital tool or platform. It can provide many of the same benefits as AP outsourcing, such as reducing the amount of time your finance team spends on repetitive or manual tasks.

If you’re choosing between AP outsourcing and AP automation, it may help to think about how the following factors impact your business processes:

• Control over AP processing. If your business wants or needs more oversight into AP processing, in-house solutions like automations may be a better fit. Passing accounts payable to an outside third party can slow down approvals and limit your ability to monitor inflows and outflows.
• Data security and privacy. If you regularly process invoices with sensitive vendor information, keeping accounts payable in-house may offer more security and peace of mind than sharing data with an accounts payable outsourcing company.
• Integration with existing systems. Many AP automation tools connect seamlessly with ERP software like NetSuite and QuickBooks, making it easier to track invoices, payments, and financial reporting in real-time. 
• Cost and efficiency. Both automation and outsourcing reduce your team’s administrative workload. But, when considering cost, per-invoice processing fees can add up quickly, particularly if you work with a large number of vendors. Accounts payable software with built-in automation eliminates manual tasks while keeping costs predictable.

Outsourcing accounts payable: Is it right for your business?

Outsourcing accounts payable can help your business realize savings and free up valuable time for your finance team to focus on substantive work, but it can also present challenges. Accounts payable outsourcing companies cut down on administrative work, but they also add another layer between you and your business’s finances, which can make it more difficult to keep an eye on cash flow. 

If your business would benefit from offloading AP management, but you’re not yet ready to send the entire accounts payable function outside, AP automation software might be the better solution. You’ll still process invoices and update your general ledger internally, but much faster and with a significantly reduced risk of human error.

Put expense and invoice management on autopilot with Rippling Spend

In Rippling Spend, you can automate and manage all of your company spend—expense reimbursements, vendor bills, payroll, and corporate cards—together on one intuitive platform. This gives companies unprecedented control and visibility over spend. With Rippling, you can create customizable reports, dynamic approval chains, and self-enforcing policies—with just a single software tool: Rippling Spend.

Rippling Bill Pay even simplifies the bill creation process, allowing you to upload invoices directly. Using AI, Rippling automatically captures bill details (invoice date, due date, amount, vendor name, addresses, etc.), streamlining data entry and reducing manual effort. 

You can provide vendors with a unique Rippling email address to submit invoices, eliminating the need for manual steps. Rippling’s Vendor Portal even allows them to keep payment and tax details up-to-date, helping you ensure accurate and timely payments.

With Rippling you can:

• Automate the way you approve invoices. Only Rippling lets you create hyper-custom approval rules that automatically route bills to the right approvers at the right time, based on employee attributes, vendors, invoice amount, and more.
• Control who can see and approve bills. Grant access to bills based on employee attributes, like department and level, as well as invoice data. That means everyone can only view and approve bills relevant to their role—and no more.
• Give vendors a secure way to share invoices and more. Update billing info, upload invoices, and more. Rippling makes it simple for your vendors to manage their payment details.
• Sync to your general ledger. Sync bills to your general ledger and auto-categorize each one’s fields, saving your team hours of busy work every month.
• Pay vendors any way you want. Check, ACH, and wires—Rippling makes it easy to pay bills your way, globally.

Accounts payable outsourcing FAQs

What is accounting outsourcing?

Accounting outsourcing is when a business hires an external professional or accounting outsourcing firm to handle finance tasks like accounts payable, accounts receivable, and payroll. Depending on your business’s needs and your provider, accounting outsourcing can extend to invoice processing, general ledger management, financial reporting, and tax preparation, freeing up internal resources for higher-value strategic work.

Can accounts payable be outsourced?

Yes, accounts payable can be outsourced. Businesses often send routine AP tasks like invoice processing, payment approvals, and vendor management to third-party providers to reduce compliance costs without sacrificing adherence to accounting standards. On the other hand, keeping AP in-house can mean better control over cash flow and more personal vendor relationships. 

How much does it cost to outsource accounts payable?

The cost of outsourcing accounts payable depends on factors like invoice volume, service level, and the specific provider’s pricing model. Some services operate on a subscription model with a flat monthly fee, while others charge per invoice. Costs can also vary based on the amount of automation a provider offers and your business’s compliance needs. At the same time, outsourcing can lead to savings in the form of reduced errors, lower processing costs, and improved efficiency, making it a financially viable alternative to managing AP in-house.   

Can you automate accounts payable?

Yes, you can automate accounts payable using AP automation tools and software that handle invoice processing, approvals, and payments on behalf of your team. Systems like QuickBooks and NetSuite integrate with existing accounting systems for seamless data transfer. It’s not entirely hands-off, however. Depending on your setup, some vendor relationships and exceptions still need human oversight.

This blog is based on information available to Rippling as of March 18, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.