What is accounts payable outsourcing and how does it work? 

Are you spending more time processing invoices than growing your business?

If so, you’re not alone.

Managing Accounts Payable (AP) in-house can be time-consuming, error-prone, and surprisingly costly.

That’s why many companies turn to accounts payable outsourcing as a smarter, more efficient way to handle these accounting tasks.  

This blog explains what accounts payable outsourcing is, how it works, and why third-party providers are helping businesses streamline their invoice processing.

Whether you’re a business owner or part of a finance team, this guide will help you decide if outsourcing AP is the right move for your business. 

What is accounts payable outsourcing?

Accounts payable outsourcing is when your business hires a third-party provider to handle all or part of its accounts payable process.

This includes everything from receiving invoices to processing payments and generating reports.  

Instead of managing this work internally, you can outsource accounts payable services to experienced professionals who use advanced tools—often powered by AI and automation—to manage your payables more efficiently.

These providers are equipped to handle invoice data capture, approval workflows, vendor payments, and compliance reporting.

They essentially act as an extension of your finance team, freeing up internal resources so you can focus on more strategic tasks.  

How does outsourced accounts payable services work?

AP outsourcing might seem complex at first, but it’s a straightforward process.

A third-party provider takes over tasks like invoice collection, data entry, approval routing, payment processing, and reporting—often using automation to boost efficiency.  

Here’s a step-by-step look at how it typically works:  

1. Invoice submission

It all starts with your suppliers.

Instead of sending invoices to your in-house team, vendors forward them directly to your accounts payable outsourcing provider—usually via email or through a secure supplier portal.

This submission creates a centralised point of entry for all invoices, reducing the risk of delays or lost documents.  

2. Automated processing

Once invoices are received, the provider uses automation tools—often with AI-powered data extraction—to scan, read, and validate the information.

The system pulls out key details like invoice number, amount, due date, and purchase order match.

To ensure payments align with the invoices, the system cross-checks each payment against the corresponding invoice, ensuring the correct amount is paid.

Additionally, fraud detection measures are built into the process, such as validating that your payments have been successfully deposited into the company’s bank account. 

For example, if an invoice for RA500 is processed but a payment for RA600 is attempted, the system flags this discrepancy, preventing overpayment and potential fraud.

Similarly, the system can detect and block duplicate invoices to prevent double payments. 

3. Approval workflow 

After processing, the invoices are routed through a customised approval workflow.

This step makes sure each invoice is reviewed and approved by the right stakeholders in your organisation.

Alerts and notifications can help speed up the approval process and reduce bottlenecks. 

4. Payment processing  

Once approved, invoices are scheduled for payment.

Your outsourcing AP provider makes sure suppliers are paid accurately and on time, using your preferred payment methods—EFT, wire, transfer, cheque, or virtual card.

This step helps your business maintain good supplier relationships and avoid late fees. 

5. Reporting and compliance 

Finally, all invoice and payment data are recorded in real-time dashboards.

These tools give your team visibility into your cash flow, spending trends, and payment status.

Most AP outsourcing providers also enhance compliance with financial regulations and provide audit trails for transparency.  

What are the advantages of outsourcing accounts payable?

Outsourcing accounts payable can save you time—it brings a range of benefits that can make a real difference to your business operations and bottom line. 

Cost savings and efficiency 

By choosing to outsource accounts payable, you can cut down on the overhead costs of hiring, training, and managing an in-house AP team.

For example, instead of spending time manually entering invoice data, automated systems handle it with speed and precision—reducing errors and saving hours of work.

This service leads to faster processing times, fewer late payments, and lower operational costs overall. 

Scalability and flexibility 

Whether your business is growing quickly or dealing with seasonal fluctuations, outsourcing AP provides the flexibility to scale without adding to your headcount.

For example, if you’re part of a retail company experiencing a surge in supplier invoices during the festive season, your AP provider can handle the increased volume—no need to hire temporary staff or overburden your internal team. 

Stronger supplier relationships 

Accurate and on-time payments keep your vendors happy and your operations running smoothly.

With a reliable AP workflow in place, you’re more likely to avoid late payments and disputes.  

For example, if you’re a mining or manufacturing business that consistently pays its suppliers on time, you may gain access to better pricing, faster delivery, or early payment discounts—all of which help improve cash flow. 

Fraud prevention and compliance 

AP outsourcing providers use advanced security protocols and compliance frameworks to protect your business.

Built-in controls—like multi-step approvals, role-based access, and AI-driven anomaly detection—can catch suspicious activity before it becomes a problem.  

For example, if an invoice amount suddenly spikes outside of normal ranges, the system can flag it for review.

This helps protect against fraud while ensuring compliance with regulations such as POPIA, SOX or GDPR. 

Access to advanced technology 

One of the biggest perks of outsourcing AP is gaining access to cutting-edge tools—without stretching your budget.

Most providers use AI-driven automation, cloud-based platforms, and real-time analytics to speed up processing and provide deeper insights into your financial data. 

This approach allows your business to enjoy the benefits of advanced technology without the cost or effort of purchasing, implementing, or maintaining it in-house. 

How to choose the right accounts payable outsourcing provider

Not all accounts payable outsourcing services are created equal.

Here are key factors to consider when evaluating potential providers: 

Industry expertise 

Choose a provider who understands your industry’s unique challenges and regulatory requirements.

For instance, if you’re managing a mining, agriculture, or healthcare organisation, your compliance needs will differ significantly from those of a retail business, making industry-specific knowledge essential. 

AI-powered solutions 

Look for providers that leverage advanced technologies like AI-driven data capture, machine learning for anomaly detection, and customisable approval workflows.

These features can significantly reduce manual tasks and improve accuracy. 

Security and compliance 

Make sure your provider follows strict security protocols and complies with relevant financial regulations, such as POPIA (South Africa’s Protection of Personal Information Act), GDPR, or PCI-DSS.

This is especially important if your business handles sensitive financial or customer data. 

Tailored services 

Avoid one-size-fits-all solutions.

Instead, choose providers that offer flexible services tailored to fit your existing workflows, approval processes, and specific business goals. 

Customer support 

A responsive support team and dedicated account manager can make onboarding smoother and help resolve any issues quickly.

Look for a provider with a strong track record of support and client satisfaction. 

Is AP outsourcing right for your business?

Still unsure whether outsourcing AP is the right move?

Here’s a quick checklist to help you decide: 

• You’re processing a high volume of invoices each month 
• Your team spends too much time on manual data entry 
• You’ve experienced delays or errors in payments 
• Your AP process lacks transparency or reporting 
• You want to reduce costs without sacrificing quality 
• You’re struggling to keep up with compliance requirements 
• You’d like to focus your internal team on higher-value work 

If you’ve checked off even a few of these, it might be time to outsource accounts payable.  

Final thoughts

Managing accounts payable shouldn’t drain your time or resources.

With accounts payable outsourcing, you can simplify your AP process, reduce costs, improve accuracy, and refocus on your business’s bigger goals.  

From invoice submission to compliance reporting, outsourcing AP offers an efficient, secure, and scalable solution for businesses of all sizes.

With access to advanced automation and expert support, it’s never been easier to take control of your finances—without having to manage it all in-house. 

If you’re thinking about making the switch, start by evaluating your current AP process and exploring providers that can help streamline operations and unlock more value from your accounting team. 

Interested in learning more about AP automation solutions?

Explore Sage accounts payable software to see how can help you track invoices, eliminate manual work, and prevent fraud, duplicate payments, or late payments to your suppliers and vendors.