You can increase your sales but if you are not able to collect payments on pending invoices, what’s the point? In small business organizations, the in-house AR team can also do credit checks to determine risk and creditworthiness. With every new customer, there is extra workload that gets added to your AR team. However, you should carefully evaluate the reliability and reputation of the outsourcing vendors besides exploring the scalability and flexibility offered by them. Additionally, assess the level of customization and support available to see what impact outsourcing will have on your business and to what extent these are in alignment with your organization’s unique needs. Business cycle timing, sales volume, and customer demographics are some of the factors that should be reviewed to help understand the advantages and drawbacks of outsourcing.
There are other important considerations like shortening the day’s sales outstanding (DSO) and mitigating risk which can influence your decision. Outsourcing of accounting and finance functions remains strong and continues to be a cost effective, attractive, and valuable alternative to onshore resources. Tasks are often repetitive and resource intensive, making it a perfect function to start with when considering offshoring. Nothing good will come from a scenario where your consumers are irritated because you provoked them.
Automated Accounts Receivable Offers the Best of Both Worlds
An AR provider with a time solely focused on your payment process can reduce errors and increase the accuracy of your invoice reconciliation. Outsourcing AR provides businesses the opportunity to cut labor costs, streamline payment processing, and utilize the knowledge and skills of industry experts. There trend of outsourcing accounts receivable is growing each year, as organisations both big and small look for more efficient ways to handle the labor intensive roles that deviate from core competencies.
- The quality of service in outsourced A/R can vary significantly between providers.
- Outsourcing has become a strategic tool for businesses looking to streamline operations and enhance efficiency.
- Following up with customers for payments and keeping a track of unpaid invoices can demand a significant time that can be utilized to optimize the core business.
- They employ streamlined processes, advanced software, and skilled professionals to ensure timely collections.
- Managing accounts receivable in-house can divert attention from core business goals.
- Accounts receivable outsourcing involves delegating the management of customer invoices, payment collections, and other related financial processes to a third-party service provider.
As a result, the corresponding A/R workload is also varied, following behind these cycles and requiring different staffing levels at different times of the year. 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. 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.
You need to fix your customer relationships
Traditional Order-to-Cash SaaS technology solutions may take up to 6 months to show a reduction of up to 2 days DSO, outsourcing your AR will certainly reduce DSO as soon as 15 days. Depending on the terms you negotiate with your outsourcing provider, this can be an immediate drop of 10, 20, or 30+ days of DSO. Taking these steps can facilitate a smooth and successful transition to outsourcing AR, allowing businesses to reap the numerous benefits it offers. Customer service and support are always a top priority in a customers’ touchpoints with your business. Technological capabilities can play an important role in selecting an outsourcing partner.
Pick the right outsource partner who will know how to deal with late-paying customers in a professional way without damaging your relationships. With an increased chance of errors, broken communication processes, and fragmented payment and collection systems, delayed payments and piling up of accounts receivables can start to create why accounts receivable outsourcing is important for a growing firm? a challenge. With nearly a decade of experience in the accounting industry, Raj is known for her seamless connection with clients, marked by professionalism and timely responsiveness. Backed by an MBA degree, she has significantly impacted organizations across various industries by enhancing efficiencies and reducing costs.