If you own a business, you know that managing accounts receivable is critical to staying afloat and achieving growth. But what if there was a way to reduce the burden on your in-house staff? The answer lies in outsourcing these tasks, which can help businesses save time, resources, and ultimately money. Read this blog to know the benefits of outsourcing receivables.
How Important Is It For Business Owners to Have A Seamless Invoice
It is indeed very important. Nothing serves as a better precedent to the matter than the recent pandemic-induced market conditions, which has put small businesses in a state of quandary. A 2020 study based on the economic impact of Covid-19 on small businesses in the U.S. stated that 43% of businesses were temporarily closed.
Out of all the firms sampled, one-fourth of them only had enough cash in hand that could cover less than one month of expenses and one-half of them could cover between one and two months of expenses. Pandemic or otherwise, a vital aspect for businesses to take control of their accounts receivable is by outsourcing receivables.
Third Party Collections – Sine Qua Non of Businesses
Accounts Receivable, by way of third party collections, is the collection of the remaining amount of money due to a firm/company for the services and products that have been availed or delivered but not yet paid for in full by the customer. This process is undertaken by utilizing consumer-friendly digitized tools and personal interactions.
Without proper tracking and managing of accounts receivable, businesses will end up with an unhealthy sheet and there will be an increase in client defaults, which puts them in a disadvantaged position. AR also determines a company’s position to grant credit – which can be a pivotal feature of customer retention strategy, and can put your business at risk if implemented inefficiently.
How Can Outsourcing Receivables Better Help Businesses?
Handling AR-related tasks while also being engaged with the rest of business activities is not an easy task, to say the least. The AR department has to manage reports of insurance claims, collections and bad debts. Efficiently managing the AR tasks along with running core business tasks can get taxing and at times impractical.
And so, the best option is hiring the best debt collection agency that offers both First-Party and Third-Party Collections. In fact, an article in Forbes mentions that “Finance and accounting was one of the first processes that companies outsourced, and the practice continues to boom.” Here are a few benefits that business owners get to enjoy when outsourcing receivables.
Credit collection services make sure that your overdue customers are contacted regularly for payments. They provide an integrated system that is nuanced in the efficient handling of billing and payment collection processes. If in case a customer wants clarification regarding the policy or credit details, an immediate response and resolution is provided, which indirectly improves the bond with the customers. Furthermore, they are adept at tackling late-paying customers and debt collection practices without damaging the relationship.
One of the primary benefits of outsourcing receivables is that it can help to increase efficiency within a business. When a business outsources its receivables, it can free up staff to focus on other tasks that are more essential to the business. Additionally, businesses that outsource receivables can often take advantage of the latest technology and processes, which can further improve efficiency.
Outsourcing receivables can also help to reduce costs for businesses. When businesses outsource their receivables, they often save money on labor costs as they eliminate the need for an in-house AR team. In addition, businesses that outsource their receivables can grow without worrying about hiring and training additional staff in time to meet the growing demand.
Outsourcing receivables can also help to reduce a business’s days sales outstanding (DSO). DSO is a metric that measures how long it takes a business to collect payments from its customers. By outsourcing receivables, businesses can take advantage of the receivables management company’s experience and knowledge to streamline their collections process and reduce their DSO. They can further negotiate the reduction days by 10, 20 or 30+ days as a business deliverable in the contract.
First Credit Services is a leading debt collection company with over 25 years of experience in the field. FCS excels in assisting companies increase their collections and manage accounts receivable effectively. The aim is to drastically reduce your roll rates and delinquencies.
Click here to know more about the services provided by FCS.