5 Ways Outsourcing AR/AP Can Transform Your Business

Partnering with an AR/AP outsourcing provider can do more than cut costs; it’s a decision that can redefine and strengthen your business.

Outsourcing is changing the way that firms do business, transforming efficiency and productivity from every angle. In one survey, 95% of wealth managers that outsource two or three functions, including accounting, saw their assets under management grow.

Accounts receivable and accounts payable are two distinctly separate but equally important accounting functions. Each involves several administrative steps like invoicing, posting payments, collecting debts, and aging reports for AR and invoice processing, vendor payments, and reconciliation for AP.  

Here are five ways that outsourcing accounts receivable and accounts payable functions can transform your business.

1. Increase Business Process Efficiency

Fewer in-house teams handling specialized tasks means less overhead. Often, outsourcing providers can offer savings through bundled services at a lower rate compared to maintaining full-time staff.  

According to the Institute of Finance and Management (IOFM), automation and outsourcing have cut the cost per AP invoice from $6.30 to $1.45 while doubling the number of invoices AP can process.

The math is clear–AR/AP functions can be more productive with the right outsourcing partner.  

2. Access Cost-Effective Expertise

The cost of key talent keeps rising. In 2024, employers expect a 4% increase in payroll, following an actual 4.4% increase in 2023.  

This trend has many firms exploring talent alternatives to traditional hiring, like fractional commitments and business process outsourcing (BPO) solutions.  

One significant benefit of outsourcing AR/AP functions is that firms can access skilled, experienced accounting staff without taking on the additional payroll burden.  

3. Better Risk Management

If you're an investment management firm, you should specialize in managing portfolios, not accounting. So, when it comes to risk management, it can make a lot of sense to seek out specialized expertise in those areas.  

In the United States, agencies like the DOJ, SEC, and CFTC have been active with several high-profile enforcement cases, increasing pressure on financial firms to deliver better risk management.  

In 2022, the SEC alone filed 760 enforcement actions, which was a 9% increase from the previous year on part of a larger multi-year trend of increasing enforcement.  

Outsourcing AR/AP tasks can support better risk management through:

  • Accounting Expertise
  • Cost-Effective Workforce Utilization
  • Access to Technology Automation (Limits Errors)
  • Implementation of Standardized Processes

4. Access to Technology & Automation

A strong majority–60% of asset and wealth management executives are full steam ahead for digital transformation.  

There are two ways to access new technology. The first is to directly invest in infrastructure, and the other is to partner with those who have already made that investment.  

Investment firms are already embracing technology to provide actionable insights and increase visibility. The actual associated costs can vary widely based on scale, but it's not uncommon to see figures in the millions to implement and maintain a new system.  

Comparatively, firms can reap the benefits of similar technologies as a pass-through benefit of partnering with an outsourcing provider that is already using them.

5. Effortless Scalability

According to a Pulse survey by PwC, a little more than one-third (35%) of asset and wealth management firms are planning an acquisition or divestiture in 2023-24.

Firms looking to make changes are strategically positioning themselves, leveraging ESG and technology to grow or stabilize their footprint in the market.  

While these firms are focused on their growth strategies, outsourcing AR/AP functions can help ensure that cash flow remains steady during each phase of the transition. It also frees the firm up to focus on its core services–portfolio management and client engagement, rather than data entry and other back-office tasks.  

Could Outsourcing AR/AP Improve Your Business?

Outsourcing finance functions like accounts receivable and accounts payable have received renewed attention as more firms look beyond cost savings to tackle growth from multiple angles. Partnering with an outsourcing provider for AR/AP can improve your operational efficiency while allowing your company to tap into specialized expertise without the hassle of recruiting and maintaining an in-house department.

Learn more about Empaxis accounts receivable and payable services tailored for all businesses, including investment managers.

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