When most people think accounts payable, they think about just bills that need to be paid. In the simplest terms and by definition, that is true. Accounts payable refers to the money owed to vendors or suppliers of goods and services that have not yet been paid for. In reality and in practice, there is so much more to it.
Because there are so many pieces to the complicated accounts payable puzzle, there is a very good chance that this area of your operations is actually costing you more than you think.
Here are 5 reasons to consider outsourcing accounts payable rather than keeping it in-house.
Time
To kick this off, here is one thing you will never be able to get back — your time! When you are managing your construction company, your list of priorities is a mile long and is always growing. Finding the time to just sort through the stack of bills on your desk is challenging enough, let alone reviewing them for accuracy, organizing, classifying, troubleshooting and paying them. Your business needs you to focus on growth, stability and daily operations of the company. By outsourcing your accounts payable, you get time back in your busy schedule, but you will also have confidence that your transactions are tagged to the correct project and cost category.
Accuracy
When you are moving so fast and have so many things to do, it is easy to make mistakes. Costly errors can be discovered when someone has the time, resources and expertise to spot areas that could lead to bigger issues down the road. One extra “0” on a payment or check can not only put you in a cash crunch, but it can make a huge mess in your finances if not caught.
In addition, because each and every payment is being reviewed and coded on a timely basis, your balance sheet will give you a more accurate indication of your financial position at any point in time. An added bonus is knowing your profitability on a real-time basis for your project budgets. Because transactions are recorded to the correct purchase order or change order in a timely manner, you can see where those specific costs are going within the budget.
Efficiencies
Time equals money. When outsourcing accounts payable, there are many efficiencies that you can take advantage of that aren’t available if you by keeping this function in-house. Because the service provider records accounts payable as a focus, they know how an accounts payable process should work and implement updates to your current process that can speed things up. They can work with your in-house team to determine roles and responsibilities for your process to make sure there are no duplicated efforts and everyone’s time is being used wisely.
Vendor Relationships
Without strong vendor relationships, you could be missing out on timely deliveries, vendor support and even vendor savings. Think of your vendors like your allies in business, they are critical to getting the work done. Without them, it would be extremely difficult for you to build houses, install roofs, or remodel homes. Keeping them happy and paid on-time is crucial and having a partner who can help manage that will pay off. Another benefit would be your provider can manage early pay discounts, which can amount to huge savings.
Cash Flow
This is a big one. Cash flow issues are a tough reality for so many construction companies. By not tracking and managing your finances, you are making an already difficult situation nearly impossible. Having so many material and labor expenses to pay for before you get paid is common. If you don’t plan for that and keep good records for your jobs, expenses and when bills are due, you can face some serious cash flow problems quickly. Not being able to pay an employee or a vendor is not a situation you want to face. When you have a vendor to help manage your accounts payable, you can trust that they are managing due dates, know what expenses will be coming up and can help your overall cash flow situation. To be clear, this is not a solution for all cash flow issues but can definitely help take some factors out of the game.
All of these items can lead to extra charges, time and issues within your business that really add up and can be costly. By having the right partner, you can trust that your accounts payables will be handled with efficiency and expertise. Knowing that your vendors are happy, bills are paid on time and accurately, and your employees are paid can relieve so much stress and worry. As you continue to grow, your accounts payable tasks get longer and more complicated. It is important that this portion of your company gets the time and attention it requires.
24hr Bookkeeper has experience and expertise to manage both monthly bookkeeping and accounts payable services. When handled together, we can create efficiencies in your overall processes and will work with you to improve cash flow. You can trust your financial reports and focus on growing your business.
Get in touch with our team today to see how we can help with your bookkeeping and accounts payable needs.
