Offshore accounts payable: how an outsourced AP process works

Offshore accounts payable is one of the easiest finance processes to hand to an outside team, because the work follows the same steps every week. Bills come in, get checked and coded, go for approval and get paid. The parts that need judgment, such as approving payments, stay with you.

Key takeaways

• An offshore AP team can handle bill capture, coding, matching, vendor records and payment preparation.
• Payment approval and release should stay with an owner or finance lead on your side.
• A single AP inbox and a written coding guide make the process far more reliable.
• Monthly vendor statement reconciliations catch missing and duplicate bills before they become problems.
• Clear weekly payment runs reduce ad hoc payment requests and late fees.

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What is offshore accounts payable?

It is the day-to-day processing of the bills your business owes, done by an accounting team in another country inside your own accounting system. The team records bills, checks them, prepares payments and keeps vendor balances accurate. You keep the final say on what gets paid and when.

How the process works

1. Capture. Vendors send bills to one AP email address, which the offshore team monitors. Paper bills are scanned into the same place.
2. Check. The team checks each bill for the right vendor, amount, due date and, where you use them, a matching purchase order or receipt.
3. Code. Bills are coded to the correct expense account, department or class using a written coding guide you approve.
4. Approve. Bills over an agreed amount go to the right person for approval, through your software's approval workflow or a simple email routine.
5. Prepare payments. The team prepares a weekly payment run with what is due, any early payment discounts and anything on hold.
6. Release. You or your finance lead review the run and release the payments from your bank.
7. Reconcile. Each month the team compares vendor statements with your records and follows up on differences.

Controls that keep it safe

Keep the ability to release payments and change vendor bank details with your own staff. Ask the team to confirm any change to a vendor's bank details by phone with the vendor, using a number already on file. Our post on internal controls when you outsource accounting covers how to split these duties, and is offshore accounting safe? covers system access.

Ask how we would set up AP for your business

Getting started

Begin with a list of your regular vendors, their payment terms and your current approval rules. The first month usually includes a cleanup of old open bills and duplicate vendor records. Our article on how to outsource your bookkeeping offshore explains the wider handover, and our payables service page lists what we cover.

Writing a coding guide

A coding guide is a one-page document that tells the AP team where each type of bill belongs. It saves more back-and-forth than any other document. Include:

• Your main vendors and the expense account each one is usually coded to.
• Which costs are split across departments, classes or locations, and how.
• The amount above which a purchase is treated as a fixed asset instead of an expense.
• How to treat prepaid items such as annual software subscriptions or insurance.
• Who approves which types of spend, and the amount thresholds for each approver.
• What to do with a bill that doesn't fit any rule: hold it and ask.

Review the guide every few months. New vendors and new departments are the usual reasons it goes out of date.

Measuring how AP is going

A few simple measures tell you whether AP is under control. Track how many bills are past due, how many are waiting for approval, how long bills take from receipt to entry and whether vendor statements agree with your records. An offshore team can include these in a short weekly summary so you can see problems before vendors start calling.

Frequently asked questions

Can an offshore team pay my vendors?

They can prepare the payments, but the safest setup is for you or your finance lead to approve and release them. The offshore team then records the payments and updates vendor balances.

How do offshore AP teams receive bills?

Usually through a dedicated AP email address that vendors send bills to. The team reviews that inbox daily and records each bill in your accounting system.

What systems can an offshore AP team work in?

Most work inside common systems such as QuickBooks, Xero and NetSuite, plus bill capture tools you already use. Your data stays in your own accounts.

How do I stop duplicate vendor payments?

Ask the AP team to check every new bill against existing bills for the same vendor, amount and invoice number before entry, and to review the payment run for duplicates before it goes to you for approval.

Hand over AP to Oakridge Global

Our accountants process bills, prepare payment runs and reconcile vendors for businesses in the US and elsewhere. Schedule a consultation with Oakridge Global to talk through your current AP process.