The past few years have seen many U.S. companies attempt to reduce the cost of managing their accounts payable (AP) function by using cheaper overseas labor to handle some of the more labor-intensive functions found in their AP process. Our experience indicates that the most common of these functions is the upfront keying of information from invoices into an electronic file for use in an ERP or financial system; quality control and cleanup on any information that lacks clarity; and, for invoices coming in with purchase order (PO) or receipt data, ensuring matching between invoice data and other sourced documents. This process is often referred to as “outsourcing” or “offshoring.”
In recent months we have fielded numerous questions about whether there are better alternatives to offshoring, as the arrangements with overseas vendors to make the offshoring strategy work are proving to be less than satisfactory.
The most common issues we hear are:
- Poor quality results - Data entry/keying errors are too high, which causes a lot of rework within their onshore teams.
- Poor scalability - As a company grows and they add additional headcount overseas, it makes for more difficult people management challenges for both the offshore and onshore teams.
- Missed discounts and payment terms - The time delay of U.S. mail receipt and transit to an offshore location can be quite lengthy, impacting potential discounts and due date submissions with vendors.
- Overseas costs are climbing - Even though outsourced labor is less expensive than U.S. labor, rates for overseas labor continue to increase which reduces the overall return and attractiveness of these arrangements.
- Increasing political risk - There is heightened media attention to the cost of such decisions and their impact on the American economy and middle class. Some companies are factoring this risk into the decision-making process.
Now that we have shed some light on the downsides of offshoring, the question becomes: What other options are available to companies seeking to decrease the cost while increasing the efficiency of their AP process? Our suggestion is you can take a more holistic approach that provides you the opportunity to reduce costs and increase value at each step of the procure to pay process. You should specifically consider:
- More cost-effective technology, like Software as a Service (SaaS), optical character recognition (OCR) and exception-based quality review, to eliminate manual keying and set the stage for further savings through AP automation.
- Automating workflow. Costs associated with invoice processing go well beyond keying and data entry. Automating workflow in your AP department will reduce the time it takes people to review and code invoices, speed payment of invoices, provide greater ability to take advantage of early payment discounts, and improve service quality and vendor satisfaction.
- Implement an automated three-way matching (invoice, purchase order, receipt data) system for PO-based invoices for “touchless” invoice processing.
These three strategies will provide your organization with the right foundation for significant AP process improvement. You can learn more at www.DataServ.us or contact us for more information at info@DataServ.com.