What is third-party billing?

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.

In this guide, we’ll answer this critical question and many others that you might have about working with a third party to handle your billing.

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?

Invoice management 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 additional reasons why businesses outsource payments to a third-party provider.

Reduces costs

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.

Ensuring compliance with industry regulations

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.

Simplifying invoice collection

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.

Safety

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.

Fees

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.

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From 3rd-party billing to automation: A smarter way forward

Switching from third-party billing to an automated billing system is more than just an upgrade—it’s a strategic move that streamlines operations, cuts costs, and boosts efficiency. While third-party billing offers convenience, it comes with limitations that automation solves, giving businesses direct control and scalability at a lower cost.

Why make the switch?

1. More control and transparency: Third-party billing keeps you reliant on external providers, often slowing decisions and obscuring visibility. Automation hands you the reins with real-time tracking and full transparency.
2. Cost efficiency: Outsourcing billing can rack up fees per transaction. Automated systems eliminate intermediaries, reducing costs and keeping processes in-house.
3. Speed and accuracy: Manual tasks lead to errors and delays. Automation uses programmed workflows to process transactions faster and with fewer mistakes.

Steps to transition to automated billing

1. Assess your current system: Identify inefficiencies, costs, and challenges in your third-party billing setup to pinpoint where automation adds value.
2. Choose the right solution: Look for platforms that integrate with existing systems, support your industry needs, and offer customizable workflows, reporting, and compliance features.
3. Migrate gradually: Start small—automate recurring payments or invoice generation first to minimize disruptions. Expand as your team gains confidence.

By transitioning to automation, businesses gain more than efficiency—they unlock cost savings, scalability, and complete control over billing management. It’s not just about keeping up; it’s about setting your business up for long-term success.

An alternative to third-party billing: Ramp

Third-party billing providers come in all shapes and sizes. Some focus solely on payment processing, while others offer specialized billing services, like consulting. But why settle for outsourcing when you could take full control?

Ramp is a finance automation platform that eliminates the need for third-party interference. It’s designed to handle bill payments, manage expenses, and give you complete visibility into your financial operations—all in one seamless solution.

Here’s how Ramp puts you in control:

• Automate bill payments: Pay bills via credit card, ACH, check, or international wire automatically—ensuring on-time payments while freeing up time for strategic tasks.
• Control spend: Set spending limits by merchant, category, team, or department, with real-time alerts to enforce compliance effortlessly.
• Centralize insights: Unlike third-party billing, Ramp provides a single, unified view of vendor details, contracts, and transactions, giving you unmatched financial oversight.‍
• Simplify expense management: Use AI-powered receipt matching and an intuitive corporate card to streamline reimbursements and expense tracking.

Ramp isn’t just an alternative to third-party billing—it’s a powerful way to manage your finances. Automate payments, control spend, and get total visibility—all with one platform.

Time is money. Save both with Ramp.