Outsourced invoice processing: Good or bad for your business?

Finance leaders may be tempted to outsource invoice processing to cut costs and streamline AP processes. The thought of offloading slow, error-prone, and expensive manual processes can be enticing, especially if it means you won’t need to add AP headcount.

Some accounts payable automation providers, such as Tipalti and AvidXchange, provide “managed services” for invoice processing. These services use outsourced reviewers and indexers to verify invoices scanned through optical character recognition (OCR). Although this approach may seem to enhance security and scanning precision, customer reviews suggest the opposite is often true.

Beneath the surface of seemingly logical outsourced solutions lurks a hidden world of potential delays, errors, and unexpected costs. From chronic errors to security risks and hidden fees, issues with outsourced invoice processing can quickly spiral out of control, leaving your AP processes dependent on an external provider. Regaining control can be expensive and frustrating, tying up people and resources and eroding any financial gains promised by outsourcing services.

Fortunately, there’s a way to streamline invoice processing while avoiding the pitfalls of outsourcing. Accounts payable automation can help you save money and improve invoice processing accuracy while keeping your AP processes in-house — and under your control.

Read on to learn more.

What’s wrong with outsourcing invoice processing services?

The problem with outsourcing invoice processing is that it means trusting your organization’s financial information — its most vulnerable data —- to a third party. Your organization could face financial losses, reputational damage, legal action, or regulatory penalties if anything goes wrong. As the finance leader, you’ll be the one left holding the bag.

Let’s break out the five biggest risks of outsourcing.

1. Loss of control and visibility over accounts payable

Outsourcing means giving up visibility and control over invoice processing, which may adversely affect your ability to effectively manage and oversee the process. One example is an AvidXchange customer’s experience with inaccurate outsourced indexers, resulting in an increased workload for their accounts payable department: “It would be great if the indexers were a little more thorough and accurate. Our payables dept has to index many items, and if this portion of the process worked as intended, we would have increased time savings. This issue has increased our department’s workload in some ways. We’ve taken the time to pre-add account numbers, ship-to addresses, etc so that invoices don’t end up in exception, but sometimes they still go there regardless. Some months a recurring invoice is indexed and then the next month, it’ll go to exception.”

2. Potential for data entry and coding errors

Invoice processing outsourcers often rely on low-cost labor to scan, enter, and code invoices, leading to higher error rates. Validating and correcting invoice errors can tie up your AP team, eliminating any efficiency gains realized from outsourcing. For example, one AvidXchange customer complained of chronic coding errors from outsourced indexers: “AVID Indexers are not effective. We have to manually touch every invoice because the AVID Indexers miscode nearly every invoice.”

A Tipalti customer was also critical of the accuracy of the company’s outsourced invoice scanning service: “Although it is great to have, 40% of the time the scan does not pick up the correct information from the invoice…”

3. Hidden costs and unexpected fees

Hidden and unforeseen expenses can make outsourcing more expensive and less cost-effective than expected. For example, one Tipalti customer complained that Tipalti’s invoice scanning service misidentified documents as invoices, leading to increased service fees: “The invoice scan does not always recognize what is not an invoice, so we receive too many non-invoices that we have to delete and ultimately pay for.”

Lack of transparency also means outsourcing may expose you to unexpected indirect costs. For example, the outsourcer may fail to alert you that an invoice is due soon, causing you to miss a payment and incur late payment fees.

4. Data security and fraud risks

Your business data is at risk any time it leaves your company. The potential consequences of a data breach or fraud can be devastating, including financial losses, damage to your company’s reputation, or legal liability. The risk is even greater for organizations in high-regulated sectors like health care, where a failure to comply with accounting regulations or data privacy laws could result in large fines and other penalties.

5. Dependency and lack of flexibility

Relying on an external provider for invoice processing can limit your organization’s ability to adapt to changes or business needs. For example, if you have a high volume of invoices, the outsourcer may be unable to accommodate the extra workload. An AvidXchange customer mentioned this issue in a review: “The indexers are likely to make mistakes which makes our high volume invoicing difficult at times.”

Outsourcers may also lack the ability to adapt as your invoice processing needs become more complex. For example, one Tipalti customer describes how data entry errors have forced them to find manual workarounds for purchase order and invoice matching: “Sometimes PO numbers do not properly pick up from the OCR system. For example, the OCR might pick up “PO 18535” instead of “18535”. This causes the AP team to have to manually link the PO, creating an extra step.”

Get total control of invoice management with AI-powered AP automation

AI-powered AP automation delivers what outsourced invoice processing promises but fails to deliver. By leveraging AI and machine learning, AI-powered AP automation solutions eliminate slow, error-prone manual processes and provide full visibility into AP processes. They reduce costs and streamline invoice processing while leaving you in complete control of accounts payable.

Let’s compare the two.

Get visibility and control over AP processes

Unlike outsourcing, AP automation leaves you in charge of your AP processes. It lets you keep your invoice processing in-house and gives you real-time visibility into invoice status, communications, and transactions. You’ll have the oversight and control to manage invoice processing effectively.

Eliminate data entry and coding errors

AI-powered AP automation solutions use machine learning to deliver exceptional precision in invoice capture and coding. They recognize different invoice types and formats to quickly and accurately capture and interpret invoice details. To maintain security and oversight, leading AP automation solutions incorporate human review of AI decisions, guaranteeing reliability.

No hidden costs or fees

Leading cloud-based finance operations platforms offer transparent, subscription-based pricing so you won’t get caught off guard by unexpected expenses. They also give you visibility into AP workflows so you can anticipate upcoming costs. For example, if an invoice is due soon, the system can automatically alert you so you can expedite payment and avoid late fees.

Greater security and fraud protection

Finance operations platforms keep your data secure and help detect and prevent fraud. Leading cloud-based solutions keep up to date on security updates to protect against hackers and provide strong controls to prevent unauthorized access to sensitive data. They also enforce internal controls like segregation of duties, audit trails, and invoice matching to avoid errors and fraud.

Scalability and flexibility

AI-powered AP automation platforms are designed to adapt when your business grows, or your processes change. Leading solutions use machine learning to automate dynamic workflows that learn your cost accounting rules and business processes and automatically adapt when they change. They also synchronize invoice data, communications, and documents with your ERP, ensuring data integrity should you choose to stop using the finance operations platform.

AI-powered AP automation is the obvious choice for companies who want to streamline invoice processing without risking losing control of accounts payable. For example, after implementing Stampli, Wenspok Companies saw a 75% reduction in invoice processing time across their 67 Wendy’s restaurants.

Get total control of invoice processing with Stampli

Stampli is the only finance operations solution that focuses on the needs of AP departments.

It’s the smartest and fastest AI-powered finance operations platform on the market, making it ideal for businesses wanting to streamline and control AP processes.

As finance leaders face growing demands to reduce costs and improve efficiency, effective accounts payable management becomes imperative for business growth. Stampli provides comprehensive support, pre- and post-implementation, with valuable resources tailored to help you optimize invoice processing.

One Stampli customer says: “The best aspect of Stampli is its seamless automation of the accounts payable process. The intelligent invoice processing and approval workflows have significantly streamlined our operations, saving time and reducing manual errors…Limited visibility into the status of invoices and a lack of a robust audit trail made it challenging to track and manage financial transactions effectively. Stampli provides a transparent and traceable audit trail, allowing us to monitor the status of invoices at every stage.

“Disparate systems and manual data entry caused inconsistencies and inefficiencies in data management. Stampli’s integration capabilities with other systems help to create a more seamless and connected financial ecosystem.”

The shift to AI-powered AP automation isn’t as hard as you might think. Stampli sets up in days, not weeks, with no ERP rework or changes to your existing processes.

Take control over invoice processing and get the visibility and control you need to better manage your accounts payable. Contact a Stampli expert today for a free demo.