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Topics: Accounts Receivable Management

Accounts receivable is an important task for every business. It’s also a time-consuming task; it can eat up a lot of in-house resources. It’s one of the reasons this task so often comes up as an option for outsourcing; getting a dedicated team to manage accounts receivable is a good idea, and outsourcing can save your company time and money.

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One question often comes up: Will outsourcing actually reduce a business’ risks—or increase them? There’s good reason to believe outsourcing accounts receivable will help your company reduce its risks.

Struggling In-House

Most businesses start out by managing their accounts receivable in-house. For many smaller firms, there often isn’t a dedicated team or staff member dealing with this task. It’s yet another hat to wear: The CEO might look after some aspects, alongside dealing with a marketing plan and attending meetings. Your sales manager or customer service representatives might get tangled up in the management of this task.

This approach has a few problems. First, while everything eventually gets done, accounts receivable often takes a back seat to other jobs—and time-sensitive tasks like sending out invoices or payment reminders aren’t completed on time.

The second major problem is people are taken away from their core tasks. When managers get caught up in dealing with day-to-day tasks, such as drawing up invoices or sending out payment reminders, they fail to see the bigger picture, and they can’t strategize effectively. As a result, inefficiencies creep into the system.

The Advantages of Outsourcing

Outsourcing accounts receivable becomes a smart move when the in-house team can’t keep up with the task. A dedicated third-party team will ensure invoices get sent on time, reminder notices go out, and follow-ups on overdue bills occur. The team members are more efficient and cost-effective since they can focus on the task at hand and use tools designed to assist them.

Outsourcing also allows you to focus on your core tasks—essentially, you can get back to business. With your head clear of the minutiae of the day-to-day grind, you can bring the bigger picture into sharper focus—and devise a better strategy for moving forward.

Getting Paid Sooner

Perhaps one of the biggest advantages of outsourcing accounts receivable is a newfound ability to get paid sooner. Most businesses find, once they switch to outsourced management, their ability to collect on accounts increases. Accelerated accounts collection, in turn, improves a firm’s cash flow. It’s especially good news for anyone in an industry where the profit margins are razor-thin—and cash flows even more precarious.

With better cash flow, you can better plan your monthly budgets—and make sure you’re meeting your financial obligations as well.

Reducing Risk

Getting paid sooner and improving cash flow is often incentive enough for businesses to outsource their accounts receivable management. But more effective and efficient management of this task has even more benefits for your business.

If your in-house team is swamped and unable to effectively manage accounts, you may not enforce your credit policies effectively. You may not follow up on overdue accounts in a timely manner, but you may also continue extending credit to those customers long after their accounts are overdue. You may not enforce your interest policy—simply because it takes time to do so. In turn, the problem of the overdue accounts drags on and on.

When your accounts are collected in a timely manner, your cash flow improves—and your credit risk reduces. Your improved cash flow reduces your need to rely on credit—and it makes it less likely you’ll default on your payments. Your creditors see that, and as your cash flow improves, so too does your credit as your business becomes less risky.


David Rae

David Rae

David started with Bill Gosling Outsourcing in 1983. As CEO, he sets the future direction of the organization, develops services that help with clients’ pain, while ensuring that the strategic direction is aligned to the shareholders’ requirements. During his tenure, the company has expanded internationally, opening offices in the United States and the Philippines. Also known as Razor, David is a drummer extraordinaire and his favorite bands include Blue Rodeo, Lighthouse, Supertramp, The Eagles, Fleetwood Mac, and The Guess Who.

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