accounts receivable outsourcing

You can set up a clear financial ecosystem when you have real-time information on incoming and outgoing cash flow. You may take proactive measures to develop your business with this information. Further, shifting to an outsourced solution typically results in a more predictable cost structure for A/R efforts. After all, you’re usually no longer paying for the required hours, instead dealing with a flat rate for the service. However, whether you’re considering automated A/R software or not, properly understanding the impact that outsourcing can deliver will empower you to make the right choice for your company. Now that we live in the future, A/R processes have grown more nuanced and varied across industries and regions.

By employing specialists dedicated to customer relationships, businesses can improve customer satisfaction and potentially boost customer retention. Clients will appreciate that you trust them to fulfill their obligations without the need for subtle but potentially aggravating reminders. Moreover, outsourcing businesses tailor their communication to match your brand, creating an excellent customer experience. As simple as it sounds, effectively managing AR can become a time-consuming challenge for many businesses. It’s too expensive to hire a full-time employee to manage this process, yet it’s too time-consuming to allocate to an existing team member. The cost of accounts receivable outsourcing is much more affordable compared to hiring in-house resources or CPA.

When Should You Need Accounts Receivable Outsourcing?

And delaying a refund for even a handful of hours while you reach out to your outsourcer can worsen a tense situation. Depending on how the outsourcing relationship is structured, you might find the service too inflexible for your needs. Of course, we here at Invoiced are quite a fan of automating your accounts receivable, believing it’s one of the best choices available in the market. In fact, we’re so confident that we wrote a white paper that outlines the specific advantages your business can net from choosing an automated A/R platform.

They can make it easier for your customers to send edit requests, make digital B2B payments with multiple options, and also reconcile invoices with their accounts payable. While you can outsource many accounts receivable functions, it may be best to retain control of some critical functions, depending on your business. Evaluate if you want to maintain control over credit risk assessment, customer service, and dispute resolution, or if you are happy to turn these over. This can help you maintain the highest level of customer satisfaction and risk management. By outsourcing accounts receivable, you experience faster and more efficient collections, which leads to reduced DSO and improved cash flow. Outsourcing accounts receivable for customer service includes handling inquiries, resolving payment disputes or misunderstandings, and assisting customers with outstanding balances.

Accounts Receivable Factoring Services

Outsourcing accounts receivable management can help mitigate the risk of bad debt write-offs. This strategic decision involves entrusting the management and collection of outstanding customer payments to a specialized third-party service provider. While some businesses may have reservations about outsourcing such a critical function, the benefits it offers can be transformative. Lastly, most premium AR service providers are tried and true professionals who are experts in customer communication and management. Pick the right outsource partner who will know how to deal with late-paying customers in a professional way without damaging your relationships. Choosing the right solution for managing your accounts receivable can significantly impact your business’s financial health and customer relationships.

accounts receivable outsourcing

Without proper business credit checks and B2B credit risk management, you can even issue credit to otherwise high-risk customers who you may not lend extend credit to before. As the number of customers increases, the chances of wrong invoices, infrequent follow-ups, and late payments also go up. There is also a risk of fragmented and isolated workflows without a proper financial reporting policy in place. The success or failure of this process directly impacts the cash flow and financial health of the business.

Step 3: Use various accounts receivable analysis

One example of a company that managed to outsource their AR and incur a positive benefit is Tern Bicycles. They used Resolve to manage their net terms and manage their accounts receivable while navigating supply chain shortages. Not only did they manage to save on the cost of hiring one full time team member, Resolve also helped them grow their average order size by 30%.