Accounts Receivable Outsourcing

What is Accounts Receivable Outsourcing

Accounts receivable outsourcing is a business practice where a company hires a third-party vendor or partner to handle some or all of their accounts receivable functions. This outsourcing company may take care of tasks such as invoicing customers, tracking payments, following up on unpaid bills, and performing customer credit checks, and more.

By outsourcing these tasks, companies can free up valuable time and resources to be applied to other core business operations or to focus on complex A/R issues that are best handled internally. Ideally, outsourcing helps businesses reduce their overhead costs, as they don’t have to hire and train their own staff to handle essential accounts receivable processes. Much of the benefit depends on the quality of the A/R partner in question, but when handled correctly by an experienced third-party, the practice can have big benefits for companies.

Why Outsource Accounts Receivable Services?

Outsourcing accounts receivable can also lead to a variety of benefits and stronger business outcomes, depending on which services are handed off. It’s common for companies to question the benefits of outsourced accounts receivable; as a critical financial process, isn’t it better to retain control by keeping things in-house?

Not necessarily. Though outsourcing is seen as synonymous with a loss of control, it’s important to acknowledge the benefits of accounting outsourcing and what businesses gain by working with a provider that has the expertise to help companies collect payments more effectively:

Expertise and experience: Companies that specialize in outsourced A/R functions have the necessary expertise, skills, and experience to effectively manage the process. They have dedicated staff who are trained in handling accounts receivable, which can lead to better workflows, less waste, and faster collections.

Cost savings: While outsourcing A/R does come with upfront costs, outsourcing these processes can be more cost effective than hiring and training an in-house team. Outsourcing providers offer economies of scale, meaning that they can offer services at a lower cost due to their size and resources.

Improved metrics: By outsourcing accounts receivable, companies can speed up the invoicing and payment process. This can help improve cash flow and help businesses reach their A/R targets more easily with respect to average time to collect, days sales outstanding (DSO), A/R turnover ratio, and more.

Focus on core business activities: Accounts receivable outsourcing allows companies to free up time and resources for other business functions, such as revenue-driving activities or other customer relationship management tasks.

The above represents a basic rundown of the benefits of accounting outsourcing, but they’re only the tip of the iceberg. Companies can realize even more benefits when their provider of choice leverages advanced accounts receivable automation solutions to extend the value of their arrangement further.

The Benefits of Accounts Receivable Automation

Many of the challenges that motivate companies to look to outsourcing A/R, can be effectively solved by an accounts receivable management & automation platform.

Some of the top use cases for A/R automation include:

Invoicing: Automating the invoicing process ensures that generated invoices are accurate and produced and in a timely manner. Automated invoicing can also reduce errors and help companies get paid faster.

Payment processing: By streamlining payment processing and allowing businesses to accept various types of electronic payments, automation reduces manual effort and helps speed up payment processing times.

Reminders and collections: Automation can also help with reminders and collections by sending out automated payment reminders and collection notices. This can help improve collections and reduce the number of overdue accounts by improving communication with customers.

Reporting and analytics: The top A/R automation platforms can provide real-time reporting and analytics on accounts receivable, giving businesses greater visibility into their financial operations. This can help businesses identify A/R collections trends and areas for improvement, supporting a stronger financial system across the board.

Contact us to learn more about the benefits of A/R collection management & automation and how our team can help you get more value out of your business.