Billing and invoicing are daunting tasks for finance teams in many organizations. To free up time for more critical tasks, several companies outsource billing to a third party.
Is third party billing right for your business? In this guide, you’ll learn the answer to this question along with the following:
What is third-party billing?
Third-party billing is a process where another company handles all invoicing and payment processes between a company and its customers and vendors. The work of a third-party billing company includes invoicing, payment, and other billing-related activities during the billing cycle.
This form of billing is especially popular with health services, insurance companies, and other sectors where billing and payment collections are complex. The services offered by third party billing agencies vary based on company size and the complexity of the payment process.
Why do businesses use third-party billing?
Invoicing and payment processing are daunting, resource-intensive tasks. The complexity inherent in these processes pushes organizations to delegate their operations to a third party. Here are four reasons why businesses outsource payments to a third-party provider.
Outsourcing invoice processing is cost-effective. Companies don’t have to build expertise in a non-core business area or invest in internal technical infrastructure. The result is lower costs in the long run since companies do not have to worry about maintenance or hiring personnel.
Payments are highly regulated, and it can be challenging to stay on top of regulations. Failure to comply with industry regulations may not only lead to hefty fines but also damage a company’s reputation. However, working with a third-party billing provider ensures compliance out-of-the-box, leading to greater confidence in the payment process.
Keeping track of billing and invoicing and ensuring that customers pay on time can be time-consuming and expensive. A third-party provider simplifies the entire process by handling collections on a company’s behalf. This saves time and money.
Security and safety are paramount for every organization’s payment process. For example, most third party payment service providers in the healthcare industry are Health Insurance Portability and Accountability Act of 1996 (HIPAA) compliant.
HIPAA is a federal law that protects sensitive patient health information from being disclosed without their consent. Failure to comply with HIPAA can lead to considerable fines.
Billing service providers across multiple industries offer a secure billing process that safeguards confidential data against malware attacks and other malicious actors.
Where third-party billing falls short
As with anything else, third-party billing has noteworthy downsides. Here’s where it falls short.
No control over your finances
While using a third-party billing provider frees up more time to work on more important tasks, you don’t have control over your finances. Delegating all your financial operations to another company is not something everyone wants.
While third party providers are highly reliable, controlling your cash flow and payment acceptance is ideal. Thus, third party billing services tend to fall short in this regard.
Third-party billing services charge transaction fees and a host of other onboarding fees that might stretch your net margins. For companies of a certain size, bringing payments in-house makes more sense since the savings they realize from the lack of one-time fees justifies the expense of setting up infrastructure in-house.
An elegant alternative to third-party billing with Ramp
Third-party billing companies come in various sizes and offer different kinds of services. Smaller service providers only tend to offer payment processing, while larger ones offer more complex, specialized billing-related services, such as consulting.
However, what if you could skip choosing a third party billing provider and use a solution that puts you in control? Ramp is a finance automation solution that can automatically pay bills without needing any third party interference.
Here’s what you can expect from Ramp.
Automate bill payments and save time
It’s no surprise that manually processing bills can take a great deal of time for the finance team. With Ramp, you can automate bill payments via credit card, ACH, check, or international wire. This means you’ll pay bills on time and free up time for more important tasks such as analyzing cash flow sinks.
Ramp helps you control spending before it happens with real-time alerts. Set spending limits by merchant, category, team, or department and digitize your expense policy automatically.
Expense management is easy with Ramp’s corporate card and expense analytics. You can track and manage your company’s expenses in one place with Ramp’s corporate card.The expense report allows your employees to create and submit expense reports without any hassle.
You can also use AI-powered receipt matching to simplify expense reimbursements. Automate accounting and other routine financial tasks to save time.
Track everything in one place
Unlike when outsourcing financial operations to a third party, you have total control over your finances with Ramp. You can keep tabs on everything, from expenses to invoices, all in one centralized dashboard.