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In-house vs Client-side: Who should handle payments?

27th Jul 2023
Brought to you by
Nook horizontal logo
Nook is a powerful payments platform that streamlines the Accounts Payable process, bringing...
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Have you found this content useful? Use the button above to save it to your profile.
Inhouse vs Clientside
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Businesses run on payments, but while outsourcing accounts receivable has become relatively straightforward in a post-cloud world, giving control of accounts payable (AP) to a third-party remains challenging.

Managing the flow of money exiting a business is a crucial task for any owner and errors can have a serious impact. Research in 2022 found that 40% of UK businesses have been on the receiving end of payment fraud in the last year, as a fast changing payment landscape brings new challenges for financial teams.

Despite the intuitive security of keeping payments fully in-house for maximum control, evidence also suggests that SMEs may not be the best equipped to manage them. Despite ‘new technology’ being selected as the primary driver of innovation in the coming year, only around 50% of SMEs were informed about Open Banking/Payment Services Directive 2 (PSD2) and UK New Payments Architecture (NPA). Meanwhile, among treasurers, over 80% were worried about their internal technology solutions in 2022.

In principle, accountants have the skills, processes and resources to operate, improve and advise on the accounts payable (AP) process, but this also requires a new approach to technology and relationships to deliver maximum value. 

Diagnosing accounts payable 

Whether in-house or outsourced, accounts payable is a complex process with major impact for businesses. The range of stakeholders, data and controls requires to execute a payment run on-time, while managing risk and cash create a huge amount of work for teams, especially when relying on manual processes.

  • Data complexity: AP requires bringing together a range of data inputs, from invoices to approvals, payment dates and terms, to correctly contextualise a payment within the wider business.
  • Coordination: Individuals requiring payments are often distinct from those approving and making them, from expense reports to supplier relationships, requiring stakeholders to communicate efficiently and precisely. In practice, this information is often siloed in various systems without visibility or control.
  • Scale: For growing businesses, payments can quickly add up, from payroll to suppliers, which then need to be approved, scheduled and executed line by line in a bank account, working from a spreadsheet, providing ample room for error. 
  • Risk: Errors in accounts payable, from duplicates to missed deadlines, have serious impacts on the business itself, opening it up to fraud, damaged relationships or cash flow uncertainty.

The consequence of all this complexity is that businesses can end up spending a huge amount of time managing payments, with one recent survey finding that 56% of businesses spend over ten hours a week processing invoices and supplier payments.

This should make AP an ideal opportunity for accountants to take on, saving their clients time and worry through better processes and efficient automation. However, many firms struggle to close the gap.

The challenges of outsourcing payments

The same issues that businesses face when managing their own AP processes can quickly be exacerbated when working with an external advisor. Working on sharing data, approvals and payment information can quickly lead to payment bottlenecks that slow down communication, execution and efficiency.

While cloud technology has streamlined some elements of the AP process, such as data extraction and reconciliation, most firms lack one crucial piece of the puzzle – the means to actually make the payment.

This leads to two possible options:

  • Firms offering a half-way solution, managing invoices, approvals and ledger entry, followed by sharing a line-by-line spreadsheet of payments to make with the client, who then makes each payment in their own account, ready for the accountant to reconcile.
  • Firms logging in to clients’ bank accounts on their behalf to make payments, which can quickly become risky, inefficient and uncomfortable in the event that any errors arise.

Even when firms are managing 80% of the AP process on clients’ behalf, it’s still shockingly easy for supplier payment risks to arise due to the prevalence of disconnected, manual solutions.

If accountants and bookkeepers want to truly make payments work for clients, firms need a solution that can not only manage 100% of the process, but do so in a way that drives trust, control and collaboration with clients. 

Closing the payment gap

Accountants making payments on behalf of their clients is the missing piece in a fully outsourced AP service, with the potential to reduce risk, enhance client relationships and create new revenue streams for firms.

Nook is the all-in-one solution for creating a fully streamlined AP service for clients, managing not only invoices, data extraction and approvals, but most importantly, payments.

  • Through Nook, clients can give their advisor controlled, authorised and permission-tailored access to make approved payments in bulk; enabling firms to make payments in the same platform through which they manage the rest of the AP process. 
  • Nook can also serve as a modular solution, connecting existing apps and tools to reduce reliance on emails, spreadsheets and manual work to create a holistic view of the entire AP process.

With payments still a crucial area of evolution for businesses, now is the time for accountants to take the lead in driving value for clients. To find out how Nook can help you make AP work for your clients, get in touch with our team of Accounts Payable Pros today.

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