Outsourcing the Processing Payables Function

Outsourcing the payment function means to use a third-party entity to process payments that would typically flow through a government’s accounts payable process. Outsourcing payments does not strip the government of the approval process of payments nor the fiduciary duty of treasury staff for these responsibilities. Approved payables are sent by the government to the third-party payment provider who will then issue the payments via check, ACH, payment card and other agreed-upon payment methods (however, please note that GFOA does not recommend outsourcing wire payments).  It is also important for governments to be aware of expanding payment methods and to learn about these technologies.  By streamlining the payment process and with enhanced controls in place that are part of the construct of banks and third-party payment providers, as well as the providers having insurance coverage, outsourcing the payables function could save staff time, mitigate risk, generate rebate revenue to the government, and have other positive impacts.