AP Payments in Dynamics GP: The Pros and Cons of Outsourcing and Dynamics GP

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Accounts Payable is a vital function of any business, but AP departments often struggle with a hefty manual workload. Perhaps you've thought about outsourcing your AP payments. Here are some pros and cons to consider.

Payment Outsourcing

Outsourcing is a business strategy in which an external contractor handles company tasks. You can outsource individual tasks or entire business processes. With AP payment outsourcing, you contract with a company to send payments on your behalf. AP payment outsourcing is distinct from outsourcing your AP data entry or vendor management. You can also outsource those processes or limit your outsourcing to payments only. You would still maintain control of your data entry and new vendor approval in-house.

Perhaps you already outsource employee payroll so that you can pay employees electronically. Payment outsourcing is a similar service for your vendors.

With payment outsourcing, you still decide who to pay and when, build payment batches within your ERP system, and approve the payments before the provider can release them.

Why Outsource AP Payments in Dynamics GP

AP payments have a long history of tedious manual work. Today's professionals are looking for the best way to automate and simplify ongoing, repeatable tasks such as vendor payments. However, implementing new processes and technology and keeping up to date with ever-evolving industry standards and regulations can tax your AP department's resources. And waiting for executive signatures, managing bank details, and making credit card payments can delay payments.

Another consideration is the number of employees working remotely and their increased demand for electronic payments. And with so many manual processes and delays, achieving real-time visibility and control is difficult.

Outsourcing AP payments can be an effective solution for companies moving toward paperless processes and streamlined workflows.

The Pros and Cons of Outsourcing

There are pros and cons to any business decision. Regarding AP payment outsourcing, there are some specific areas to consider. Let's start with the pros:

1. Operational efficiency

Payment providers offer additional services beyond paying your vendors. Most will also transition vendors to ACH or virtual card payments and deal with the vendors if payment issues arise. That will relieve you of configuring your ERP solution to handle multiple payment types requiring different workflows. Most outsource solutions allow you to send a single payment file to your provider, and they take care of the rest.

A full-service provider will generate results more efficiently because they have the systems, technology, and human resources dedicated to payment processing.

2. Cost savings

Of course, outsourcing is not free, but it often costs less than generating in-house payments. You'll save on the necessary supplies such as checks, printer ink, envelopes, and postage. And you'll also have access to the latest payment technology without purchasing it for your business.

Also, if your payment partner makes payments by credit card on your behalf, you may receive rewards or rebates. This extra income could offset - or even surpass - the costs associated with outsourcing.

3. Security

Payment providers often supply vendor portals allowing your vendors to manage their information securely. Providers invest heavily in security protocols so you can trust them with your sensitive data.

Providers typically assume the liability for outgoing payments, so your business is no longer on the hook for any successful fraud attempts.

4. Business growth

Outsourcing payment tasks allows your AP team to upskill and cross-train for growth opportunities without hiring additional employees for non-revenue-generating activities.

But what about the cons?  Dynamics GP automated AP processing can eliminate the need for outsourcing.

Why might you not want to outsource payments? Outsourcing payments is not the best approach for all businesses. It may not fit with your cash management strategy or your vendor relationships. Here are some items to consider:

1. No float

With payment outsourcing, funds to cover vendor payments are withdrawn from your account upfront. You can't rely on check float for cash management,  and your funds won't be earning interest.

2. Privacy issues

Payment providers have strict security regulations and protocols. However, you'll need to sacrifice some privacy when outsourcing. If you don't want a third party to have access to your contacts or vendor data, outsourcing is not for you.

3. Loss of Custom Processes

Providers are efficient because they've standardized their processes. If you need configurable remittances or need to fund and process payments on the same business day, your provider may be unable to accommodate you. If you have vendors who prefer to pick up checks, that may pose a problem.

4. Change in vendor communications

Outsourcing some of your processes may require changes in interaction,  especially if you have vendors accustomed to your team's attention. Some vendor relationships may be too strategic to hand off.

So, should you outsource AP payments in Dynamics GP?

Outsourcing AP payments makes sense for many organizations but not for all. If you choose to outsource, select a provider who can meet your needs and alleviate your concerns. If you decide not to outsource,  AP automation will help. You'll need the resources to streamline your processes in-house, and the IT budget and support needed to update your systems.

If you process AP with Dynamics GP or Dynamics 365 BC, Mekorma can help determine whether payment outsourcing is a good option for your business.

Reach out today for a free assessment

By Mekorma, mekorma.com


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