Accounts Payable Automation vs Outsourcing Pros Cons & Best Practices for 2025

How much do you know about the AP which is arguably the most important part of your financial process? Let’s talk about accounts payable you know that part of your business where you manage and pay all those bills from vendors and suppliers. It’s not exactly the most exciting topic, but it’s absolutely necessary, and how you handle it can make a huge difference to your bottom line. 

Many businesses are stuck between two options: automating their AP processes or outsourcing them entirely. Both approaches can work great, but they solve different problems in different ways. So which one makes sense for your business? 

 

What’s Really Going on with Accounts Payable Today? 

Before jumping into solutions, let’s look at what makes accounts payable such a headache for so many companies: 

• It costs way too much – Processing a single invoice manually can cost anywhere from $15-$40 when you factor in labor, materials, and time 

• Errors happen constantly – Typos, duplicate payments, missed invoices… the list goes on 

• Cash flow becomes a mystery – Without good AP systems, you never really know how much you owe or when it’s due 

• Vendor relationships get strained – Late payments and communication gaps create tension 

• Fraud remains a serious threat – AP departments are prime targets for both internal and external fraud 

 

And the AP landscape keeps changing. These days, we’re seeing: 

• AI and machine learning taking over repetitive AP tasks 

• Cloud-based systems becoming the norm rather than the exception 

• Regulators paying closer attention to payment practices and compliance 

• The pandemic pushing remote work, making paper-based AP processes nearly impossible 

 

What Exactly Is AP Automation? 

AP automation uses technology to handle the invoice-to-payment process with minimal human intervention. Think of it as giving your AP department a digital assistant that works 24/7 without coffee breaks or vacation days. 

Here’s what a modern AP automation system actually does: 

• Captures invoices from any format (paper, email, PDF) and converts them to digital data 

• Matches invoices to purchase orders and receiving documents automatically 

• Routes approvals to the right people based on your business rules 

• Tracks everything in real-time so you always know where things stand 

• Connects seamlessly with your accounting system or ERP 

 

Businesses choose automation when they’re tired of: 

• Watching their AP team drown in paperwork 

• Paying late fees because invoices got lost in someone’s inbox 

• Missing early payment discounts because approval took too long 

• Answering constant calls from vendors asking about payment status 

• Struggling to close the books each month because AP data is scattered everywhere 

One small manufacturing company I worked with was processing about 500 invoices monthly, with three full-time AP clerks. After implementing automation, they handled the same volume with just one person, who now focused on exception handling and vendor relationships instead of data entry. 

 

What About AP Outsourcing? 

Outsourcing AP means hiring an external company to handle some or all of your accounts payable functions. These providers essentially become your AP department, handling everything from receiving invoices to making payments. 

Typically, outsourced AP services include: 

• Setting up a dedicated PO box or email for receiving vendor invoices 

• Scanning and extracting data from paper invoices 

• Coding invoices to the right accounts and departments 

• Contacting vendors to resolve discrepancies 

• Processing payments according to your schedule 

• Creating reports on AP performance and spending 

 

Companies often outsource AP when they: 

• Don’t have the budget for a dedicated AP team 

• Experience seasonal fluctuations in invoice volume 

• Want to focus internal resources on strategic finance functions 

• Need expertise they don’t have in-house 

• Are expanding into new markets and need local AP knowledge 

A retail client with highly seasonal business found outsourcing worked perfectly because they could scale up during the holiday rush without hiring temporary staff. Their provider handled 3x the normal invoice volume during peak season without missing a beat. 

 

AP Automation vs. AP Outsourcing: Key Differences 

Let’s break down the key differences: 

 

Factor	AP Automation	AP Outsourcing
Cost Structure	Higher upfront investment (software licenses, implementation) but lower ongoing costs	Lower initial investment but continuous service fees that typically scale with volume
Control	You maintain complete control and visibility	You’re giving up some control to an external provider
Scalability	Most systems easily handle growing invoice volumes with minimal additional cost	You’ll likely pay more as volume increases, and may face contract renegotiations
Accuracy	AI and machine learning continuously improve accuracy over time	Depends entirely on the provider’s staff and their attention to detail
Fraud Protection	Advanced systems include AI-powered fraud detection	Introduces third-party risk, though reputable providers have strong controls
Processing Speed	Near-instant processing with 24/7 availability	Subject to the provider’s working hours and capacity
Compliance	Built-in compliance features with automatic updates	Relies on the provider staying current with regulations
Vendor Relationships	Enables faster payments and self-service vendor portals	Adds another layer between you and your vendors
Implementation Time	Typically, 2-6 months for full deployment	Can be operational in weeks
Technical Requirements	Requires IT resources and system integration	Minimal technical requirements on your end
Staff Impact	Shifts AP team from data entry to exception handling	May reduce need for in-house AP staffing
Long-term Value	Value increases over time as system learns and improves	Value remains relatively constant or decreases with volume growth

The Good and Bad of AP Automation 

Every solution has its strengths and weaknesses. Let’s look at automation first: 

What’s Great About Automation: 

• Speed wins – What took days now takes minutes or seconds 

• Accuracy improves – One client reduced error rates from 12% to under 1% 

• Costs drop over time – The ROI typically becomes clear within 12-18 months 

• Visibility increases – Real-time dashboards show exactly where your money is going 

• Security tightens – Less paper and fewer people touching invoices means fewer opportunities for fraud 

• Growth becomes easier – Good systems scale without adding headcount 

 

What’s Not So Great: 

 

• It’s not cheap to start – Expect to invest $25,000-$100,000+ depending on your size 

• Implementation takes time – Plan for 2-6 months before you’re fully operational 

• Legacy systems fight back – Older accounting systems may resist integration 

• Someone still needs to manage it – You’ll need at least one person who understands the system 

 

 

The Good and Bad of AP Outsourcing 

Now let’s examine outsourcing: 

What’s Great About Outsourcing: 

• You can start quickly – Some providers can have you up and running in weeks 

• Experts handle your work – You benefit from specialized AP knowledge 

• Your team gets time back – Finance can focus on more strategic work 

• Compliance can improve – Good providers stay current on regulatory requirements 

 

What’s Not So Great: 

 

• You lose some control – When problems arise, you’re dependent on the provider to fix them 

• Costs can creep up – Watch out for per-invoice fees, implementation charges, and minimum volumes 

• Security becomes a concern – Your sensitive financial data leaves your systems 

• You create dependencies – Changing providers later can be disruptive 

• Communication can suffer – Vendors may get frustrated dealing with a third party 

 

Making AP Automation Work in 2025 

If you’re leaning toward automation, here are five practices that will help you succeed: 

1. Know What Success Looks Like

Before you shop for software, get crystal clear about what you want to achieve: 

• Are you trying to reduce processing costs by a specific percentage? 

• Do you want to eliminate late payments entirely? 

• Is capturing early payment discounts your priority? 

• Are you trying to free up your AP team for higher-value work? 

Write down your top three goals and the metrics you’ll use to measure success.

 

2. Pick the Right Technology Partner

Not all AP automation systems are created equal. Ask tough questions: 

• How does the system handle non-PO invoices? 

• What percentage of invoices typically require human review? 

• How does the OCR technology handle poor quality scans? 

• What happens when the system can’t match an invoice to a PO? 

• How are system updates and enhancements delivered? 

Look for vendors with experience in your industry and company size. A system designed for Fortune 500 companies might be overkill for a small business. 

 

3. Get Buy-In from Everyone Who Matters

AP automation affects multiple departments. Include these people early: 

• The AP team who will use the system daily 

• IT staff who will support the integration 

• Department managers who approve invoices 

• Treasury team members who manage cash flow 

• Your controller or CFO who needs reliable financial data 

One manufacturing company we worked with failed to involve their purchasing department in the selection process. Six months after implementation, they discovered the automation system couldn’t handle their custom approval rules for capital expenditures. 

 

4. Clean Up Your AP Process First

Automating a broken process just creates automated problems. Before implementation: 

• Standardize your invoice approval workflows 

• Clean up your vendor master file 

• Document exception handling procedures 

• Establish clear coding guidelines 

• Define roles and responsibilities 

Think of it like moving to a new house – you don’t want to pack up junk you don’t need. 

 

5. Watch the Numbers Closely

Once you’re live, track performance religiously: 

• Monitor invoice processing times 

• Track exceptions and manual interventions 

• Measure cost per invoice 

• Survey approvers and vendors about satisfaction 

• Compare actual results to your original goals 

 

One healthcare client noticed their exception rate wasn’t improving after three months. Investigation revealed that several large vendors were still sending paper invoices directly to departments rather than to the new digital intake process. A simple vendor communication campaign solved the problem. 

 

When Does Outsourcing Make More Sense? 

Outsourcing might be your better bet if: 

• You’re a smaller company without dedicated AP staff You might not have enough invoice volume to justify automation software but still need professional AP management. 

• Your cash position makes upfront investment difficult Outsourcing requires less capital expenditure to get started. 

• Your invoice volume fluctuates dramatically If you have seasonal peaks, outsourcing can flex with your volume without requiring you to manage changing staffing levels. 

• You need a quick solution Outsourcing can be implemented faster than most automation projects. 

• Your AP needs are fairly standard If you don’t have complex approval workflows or unusual processing requirements, outsourcing providers can typically handle your needs without customization. 

 

When Is Automation the Clear Winner? 

Automation typically works better when: 

• You process thousands of invoices monthly The ROI becomes compelling at higher volumes. 

• You need tight integration with your other systems Automation solutions often connect better with your ERP and procurement systems. 

• Control and visibility are non-negotiable You want full transparency into your AP process at all times. 

• You have complex approval workflows Custom routing rules and multi-level approvals are easier to manage with automation. 

• Your team embraces technology You have the technical resources to implement and support an automation solution. 

A client in the construction industry chose automation over outsourcing specifically because they needed real-time visibility into project-related expenses across hundreds of active job sites. 

 

Making the Right Choice for Your Business 

So which approach is right for you? Ask yourself these questions: 

• What’s your invoice volume, and is it steady or variable? 

• How complex are your approval workflows? 

• What’s your budget for improving AP? 

• How important is maintaining direct control? 

• What’s your timeline for implementation? 

• How tech-savvy is your finance team? 

 

Sometimes the best answer isn’t an either/or decision. Many businesses are adopting hybrid approaches: 

 

• Automating core AP functions while outsourcing specific tasks like vendor management 

• Starting with outsourcing to clean up processes, then transitioning to automation 

• Using outsourcing for certain divisions or regions while automating others 

A distribution company we worked with used this hybrid approach very effectively. They implemented automation for their main operations but outsourced AP for a new division they acquired, allowing them to integrate the new business gradually without disrupting operations. 

 

The Bottom Line 

Whether you choose automation or outsourcing, doing nothing is probably the most expensive option. Manual AP processes drain resources, introduce errors, and create unnecessary friction with your vendors. 

Both automation and outsourcing can transform your AP function from a cost center to a strategic asset, but technology-driven solutions like Zenwork Payments AP Automation Software are setting new standards in 2025. 

Zenwork Payments transforms your AP process through its intelligent automation platform that goes beyond basic digitization. With Zenwork, businesses typically see: 

• Invoice processing time cut by 80%, from weeks to just hours 

• Processing costs reduced by up to 70% compared to manual methods 

• Approval cycles shortened from days to minutes with mobile-friendly workflows 

• Cash flow visibility improved through real-time dashboards and forecasting tools 

• Vendor satisfaction scores increasing as payments become more reliable and transparent 

 

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