How Accounts Payable Outsourcing Improves Accuracy, Speed, and Internal Controls

2/9/2026 - By Jeff Clark

The Saltmarsh Summary

  • Most small to midsized businesses outgrow their AP control structure years before anyone formally acknowledges it. The warning signs tend to surface in audit findings, lender questions, or diligence reviews rather than in daily operations.
  • Weak AP controls create financial exposure that extends well beyond fraud risk. Duplicate payments, missed discounts, and processing errors can quietly drain hundreds of thousands of dollars each year. For many businesses, those dollars often represent the difference between making payroll comfortably and watching cash get tight.
  • AP outsourcing, when designed correctly, can transform a back-office vulnerability into a governance strength that holds up under audit scrutiny, lender review, and transaction diligence.

As companies grow, their back-office operations often fail to keep pace. The accounts payable process that worked at a couple of million dollars in revenue becomes strained as companies continue to grow. Key employees become single points of failure. Segregation of duties weakens. Month-end close depends on institutional knowledge held by one or two people.

These gaps rarely emerge suddenly. They develop incrementally as transaction volumes increase, reporting requirements expand, and operational complexity compounds. By the time leadership recognizes the structural mismatch, workarounds have become embedded in daily operations.

The result is a control environment that no longer matches the scale and complexity of the business it's supposed to protect. For many companies, the solution to these challenges lies in accounts payable outsourcing: a partnership with an experienced vendor that improves cash flow, accuracy, and internal controls in your business. 

Where the Exposure Actually Lives

AP control failures create three categories of financial risk, each with consequences that extend beyond the immediate dollars involved.

Cash leakage you may not be measuring. APQC's Open Standards Benchmarking data shows that even top-quartile organizations report duplicate or erroneous payments equaling roughly 0.8% of annual disbursements. Bottom-quartile performers exceed 2%. For a company disbursing $8 million annually to vendors, that gap represents the difference between $64,000 and $160,000 in preventable losses. At the lower middle market level, most organizations don't track this metric at all, which means the leakage continues undetected until an audit surfaces it, often months or even years after the fact. 

Discount capture failures that erode margins. Standard vendor terms like 2/10 net 30 offer a 2% discount for payment within 10 days. Annualized, that discount represents a 36% return for accelerating payment by 20 days. When invoices stall in approval queues because your one-person AP function is also handling AR, payroll, and whatever else lands on their desk, those discounts expire. A $15 million company with $6 million in eligible vendor spend missing even half of available early payment discounts is forfeiting $60,000 or more annually. For a business operating on thin margins, that's real money walking out the door.

Control deficiencies that follow you into diligence. This is where AP weakness becomes an enterprise value issue rather than just an operational one. Auditors are required to communicate significant deficiencies and material weaknesses in writing to management and the board. When those findings relate to segregation of duties or the company's ability to prevent and detect misstatements, they don't disappear after the audit. They surface again when your bank reviews financials during a line of credit renewal. They appear in quality of earnings reports if you're approached by a private equity firm or strategic buyer. They become negotiating points that affect deal terms, earn-outs, and valuation multiples.

A control deficiency that seems manageable in an audit context becomes a material issue when capital or an exit is on the table.

Why Internal Fixes Often Fail

The instinctive response to AP control concerns is to solve them internally. Hire another person. Implement new software. Add an approval layer. These approaches can work, but they frequently don't, for reasons that have less to do with execution than with organizational dynamics.

You can't afford the headcount that true segregation requires. Proper segregation of duties means separating the person who creates vendors from the person who enters invoices from the person who approves payments from the person who reconciles bank accounts. For a $10 million company, dedicating three or four people to AP isn't realistic. So you end up with one person doing most of it, maybe two, and the segregation that auditors want simply doesn't exist.

Technology doesn't replace process design. AP automation tools can accelerate processing and reduce data entry errors, but they don't inherently solve control problems. A system that routes invoices faster is still vulnerable if the same person can create vendors, enter invoices, and initiate payments. Technology amplifies whatever process it's applied to, including flawed ones.

Your bookkeeper has become irreplaceable, and that's the problem. When one person understands how AP actually works, including the exceptions, workarounds, and undocumented procedures, their departure creates immediate operational risk. This concentration of knowledge also makes it harder to implement controls, because any change requires their buy-in and cooperation. You've probably already experienced the anxiety that comes when that person takes a two-week vacation or is out on sick leave.

The deeper issue is that AP control design requires a perspective that's difficult to maintain when you're inside the operation. You need someone who understands what auditors look for, what banks expect, and what buyers will scrutinize during diligence. That perspective rarely exists within a small company's accounting function.

What Changes with the Right Outsourcing Partner

Accounts payable outsourcing, structured properly, addresses the control gap in ways that internal solutions often cannot.

Segregation becomes structural rather than procedural. When an external team handles invoice processing while your internal staff retains approval authority, the separation of duties is built into the operating model. It doesn't depend on managers enforcing role boundaries or employees resisting the temptation to take shortcuts. The external provider physically cannot approve payments, and your internal approvers are reviewing work they didn't prepare. This is the kind of segregation that auditors and diligence teams actually trust.

Process discipline comes standard. Reputable outsourcing providers build their operations around controls like three-way matching, which verifies that purchase orders, receiving documents, and invoices align before payment is released. They maintain documentation standards, audit trails, and exception handling procedures because their business depends on it. You inherit that infrastructure without having to build it yourself.

Scalability stops being a control tradeoff. When invoice volume spikes during growth periods or seasonal peaks, an outsourcing partner can absorb that volume without the control compromises that typically accompany rapid internal scaling. You don't have to choose between processing speed and segregation of duties. You don't have to grant temporary access to employees who shouldn't have it. The control structure remains intact regardless of volume.

Institutional knowledge transfers to institutional process. Outsourcing forces documentation. The handoff process itself requires mapping current procedures, identifying exceptions, and codifying decisions that previously lived only in someone's head. Even if you eventually bring the function back in-house, that documentation has permanent value.

What to Look for in a Partner

Not every outsourcing arrangement delivers these benefits. Accounts payable outsourcing typically forms part of a larger outsourced accounting arrangement, and this broader scope is important in ensuring appropriate oversight. Here are several key principles to keep in mind as you evaluate potential accounts payable outsourcing partners:

  • Audit awareness matters. The provider should understand what auditors look for in AP controls and how findings translate to management letter comments and diligence reports. If they can't speak to segregation of duties, three-way matching, and documentation standards in audit terms, they're processing invoices, not solving your control problem.
  • Integration shouldn't mean access creep. The provider's access to your systems should be limited to what's necessary for their defined role. If the engagement requires granting the provider approval authority or access to functions beyond invoice processing, you haven't created segregation. You've just relocated the concentration of duties.
  • Efficient use of technology. The AP technology available today doesn’t entirely automate processes, but a well-designed solution tailored to your business’s specific needs does save time and improve accuracy. Prioritize working with partners that give you access to the technology you need to run your AP process smoothly.  
  • Reporting should support oversight, not replace it. You should receive regular visibility into processing volumes, exception rates, aging, and control metrics. Outsourcing removes the work from your team, but it shouldn't remove your ability to monitor performance and verify that controls are operating as designed.

Partner with Saltmarsh Outsourced Accounting Solutions to Streamline Your AP Process

Saltmarsh is a full-service outsourced accounting firm with deep expertise in audit, tax, and advisory services. We understand what auditors flag, what banks require for credit renewals, and what buyers examine during diligence because we work on all sides of those engagements.

When we design an outsourced AP function for a growing company, we're not just thinking about invoice throughput. We're thinking about how the control structure will present in your next audit. Whether it will satisfy the questions your bank asks when you need to expand your line of credit. How it will hold up when a buyer's quality of earnings team examines your financial operations.

We work with companies in construction and real estate, manufacturing, healthcare, nonprofits, and other industries where financial controls face heightened scrutiny. We understand the sector-specific risks and regulatory expectations that generic providers often miss.

If your AP function has become a source of quiet concern rather than operational confidence, or if auditors and bankers have started asking questions you'd rather not answer, that's worth a conversation. Contact us to learn more about our accounts payable outsourcing solutions.

About the Author | Jeff Clark

Jeff is a director with experience across outsourced accounting and advisory services. He began his career in public accounting over 35 years ago, focusing on delivering strategic financial solutions. His primary areas of experience include providing financial analysis, fractional CFO services, and strategic consulting.

 

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