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Accounts Payable Best Practices
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will in turn bother the accounts payable staff about payment—something that it is
trying to avoid through the use of this Web site.
Cost: Installation time:
3–21 OUTSOURCE THE ACCOUNTS PAYABLE FUNCTION

Many controllers do not want to waste time managing such a mundane function
as accounts payable. It does not directly contribute to the mission of any company,
nor does it impact customer service. In short, it is a baseline clerical function that
merely takes up management time with no particular payback. By off-loading
this function to a supplier who specializes in accounts payable processing, a con-
troller can reduce the management time devoted to this functional area and allocate
more time to other more profitable company functions.
Besides reduced management time, it can also be less expensive to outsource
to a qualified supplier. A well-run supplier has an excellent knowledge of accounts
payable best practices and uses that knowledge to drastically cut the processing
effort needed. This is an especially attractive option for those companies that are in
difficult financial circumstances and that would prefer to pay just a per-transaction
fee, rather than an entire staff. This essentially converts a large fixed cost to a
variable cost that will not be incurred if there are no transactions to process.
Outsourcing accounts payable usually means that the entire company staff
devoted to this work will be shifted to the supplier who is taking over the work,
though it is also possible that the supplier will not need these people, or will
‘‘cherry-pick” only the most qualified. If the latter is the case, then the controller
should meet with the staff to honestly appraise their future prospects with the
supplier or to provide outplacement counseling. The supplier should also be
available at these meetings to answer any employee questions, as well as to enroll
employees in supplier benefit plans and to convert them to the supplier’s payroll
system.
Besides the staff conversion, the controller must also determine how to man-
age the supplier. This is not a case of handing the work to the supplier and then
paying the supplier’s bills—on the contrary, some oversight will always be neces-
sary to handle any problems that may arise, such as complaints from suppliers
that are not being paid, verifications that discounts are being taken, and approvals
of all payments prior to payment. These activities are most commonly handled at
the level of an assistant controller, though the controller may manage the supplier
directly if the transaction volume is minimal. In all cases, some continuing over-
sight by the remaining accounting staff is necessary.
One should also consider the degree and form of ongoing interaction with
the supplier necessary to ensure that accounts payable are processed correctly.
For example, if a company has a fully integrated accounting and manufacturing
software package, it will be impossible for the supplier to process accounts