Council Finance: 10 Reasons UK Councils Shift to In-House AP

Accounts Payable Outsourcing vs Automation: Why local councils in the UK are taking a fresh look.

Outsourcing the Accounts Payable process has long been a strategic choice for local councils seeking to optimise their council finance operations, reduce costs, and deliver efficient services to their communities.

Council Finance Troubles with Outsourced Accounts Payable

Initial savings have been overtaken by rising costs, leading to an inefficient finance process. Council finance leaders are scratching their heads, wondering what went wrong.

So why isn’t it all adding up? What has changed to motivate council finance teams to bring the AP process in-house?

The Changing Landscape of Council Finance and AP Management

We delve into the multifaceted world of outsourcing in the context of UK councils and explore the top 10 factors motivating the shift from outsourced accounts payable to in-house AP management in the council finance sector.

1. Cost Concerns: Cost is an important consideration for any UK public body seeking a new service. Though outsourcing may seem cost-effective, it can cost you in the long run. Outsourcing can sometimes lead to unexpected costs, as service providers might increase prices over time or the initial cost projections might not align with the actual expenses incurred. Bringing your accounts payable process back in house gives you more control over where exactly your budget is going.
2. Quality and Accountability: While outsourcing can be efficient, it can also introduce quality and accountability concerns. Outsourced services might not always meet the desired standards of quality or accountability. And this is of especial concern for public bodies. If a council feels that service quality is compromised or that the contractor is not being held accountable for their performance, they might consider ending the outsourcing agreement. In-house management better ensures the quality and integrity of your data.
3. Public Backlash: If outsourcing decisions are met with strong opposition from the public or local communities, councils may choose to reconsider their agreements in order to maintain public trust and support. The Association for Public Service Excellence uncovered, “Insourcing services has led to dramatic increases in service user satisfaction levels, as demonstrated in the London Borough of Southwark, where satisfaction with street and estate cleaning rose from 30% to 70% in four years.” Insourcing has been proven to improve service quality and help maintain community approval.
4. Strategic Alignment: Councils, like any organisation, evolve over time. A change in the council’s strategic goals or priorities can prompt councils to reassess whether outsourcing still aligns with their objectives. It may be more advantageous to bring services in-house to have more direct control over their implementation and management. This allows councils the flexibility to ensure services are aligned with their goals.
5. Complexity and Coordination: Certain services are inherently complex and require seamless coordination with other local government functions. If outsourcing leads to difficulties in coordination or communication, councils might choose to manage those services internally. A study by the Guardian has found that, “78% of local authorities believe insourcing gives them more flexibility, two-thirds say it also saves money, and more than half say it has improved the quality of the service while simplifying how it is managed.” Not only does insourcing improve cost efficiencies and quality, but it can also simplify service management.
6. Risk Management: Certain services might involve significant risks that the council wants to manage more closely. In such cases, they might decide that bringing the service in-house is a more effective and direct way to control and mitigate those risks.
7. Economic Factors: Economic changes, such as fluctuations in currency values or changes in global markets, could impact the cost-effectiveness of outsourcing agreements. This is more evident than ever with the pandemic and the war in Ukraine still affecting world economies. Councils might decide to end or modify agreements based on these factors. As covered in cost concerns, inhouse provides more pricing stability and so is less affected by economic factors.
8. Changing Legal or Regulatory Landscape: Changes in laws or regulations can impact the feasibility or desirability of outsourcing certain services. If the legal environment shifts, councils might reevaluate their outsourcing arrangements. As legal requirements can vary from county to county, it is easier for a council to keep track of local changes and implement them than an outsourced company.
9. Local Job Creation: Councils might prioritise local job creation and economic development, leading them to bring certain services in-house to directly contribute to local employment. This boosts the local economy and improves relations between the council and the local community they serve.
10. Technology Advancements: Advances in technology might make it more feasible or cost-effective for councils to handle certain services internally, especially if automation or digital solutions can streamline processes. Being proactive and implementing solutions like AP automation makes councils more modern and proactive. Furthermore, organisations that are proactive experience improved growth, increased productivity, better workplace environments, better control, and employees with improved job satisfaction.

The Future of Council Finance with In-House AP Automation

Imagine a future where local councils operate like well-oiled machines, streamlining complex tasks effortlessly. That future is here and now for many councils thanks to cutting-edge in-house AP automation solutions. Take Lambeth Council, for instance: they’ve catapulted into a new era of efficiency with 66% touch-free invoice processing and a move to 100% paperless invoicing, all through implementing Kefron AP.

Transform Your Finance with AP Automation

The choice between outsourcing and in-house management is a nuanced one, hinging on your unique needs, financial outlook, and aspirational goals. Ready to take the leap into this promising future? Speak to a Kefron AP expert today and discover how automation could revolutionise your invoicing process and help you reach new heights.