There are plenty of reasons small business banking institutions are turning to third parties when it comes to collections; the advantages of doing so are becoming more apparent.
If you’ve been wondering why small business banking should outsource collections, consider the following reasons.
Accelerated Account Collection
Small business banking focuses on business services for smaller firms. Obviously, this can turn into a risk: Small companies are more likely to have uneven sales, to rely on credit, and to have problems with cash flow. The result is small businesses are more likely to end up defaulting on loans; they’re also more likely to go under than their larger counterparts.
The smallest firms are also likely to be run by small teams—sometimes even just one person. This person might simply forget to pay bills because they’re so busy. Even those with larger staffs might forget to process invoices.
When invoices and overdue notices are delivered in a timely manner, it helps everyone—including your firm and the business, as they can get their bills paid on time and avoid overdue fees and collections. A third-party provider can help you accelerate your account collections.
Those working in the small business banking sector might wonder why it would be a good idea to outsource account collection to a third party. After all, you’re involved in the banking sector; your firm should be great at managing accounts receivable and collections. In many firms, this work falls to the accounting department, and the banking industry employs many accountants.
Nonetheless, outsourced collections efforts are often more efficient than their in-house counterparts. The reason? You’re getting a dedicated team using the latest techniques and technology to support their work. When your entire focus is accounts collection and you have the proper tools, there’s no reason you can’t do it faster.
Some in the small business banking sector would likely argue that if you’re having trouble managing accounts receivable and collections, the problem is you need more employees. Hiring another person or two should solve the problem.
Some firms aren’t in the position where hiring another staff member is an option, however; other firms want to reduce the costs associated with accounts collection. That might mean reducing their teams, but it could also mean spending less time on the task, getting better results, or reducing associated operating costs.
Outsourcing to a third party can help small business banking players reduce costs in all of these sectors.
Get in Line with Business Practices
In small business banking, there are certain practices to follow, such as rules to apply when extending credit or certain legalities regarding loans and credit cards. Some rules aren’t formalized, but are considered “best practices.”
When it comes to accounts receivable and collections, however, many firms find themselves in unfamiliar territory. They may not be aware of current best practices—or they may not keep up to date on newer techniques to handle account collection.
Third-party providers keep on top of trends and ensure they’re using the industry’s best practices when it comes to collecting accounts. It’s no longer something you need to worry about when you team up with the right provider.
Everyone knows it’s easier to retain existing customers than to acquire new ones, which is why handling account collections properly is so important. While some customers may fail to pay their bills, it doesn’t mean you don’t want to keep working with them—especially if it’s a simple mistake.
Instead, have a third-party provider interact with your customers to make account collections a painless process. Customers will continue to see your brand in a positive light, and they’ll want to continue doing business with you.