How AR Software Automation Mitigates Outsourcing Challenges

December 7, 2023

With the move to digital invoices and payments, managing receivables has become increasingly complex. Reconciling invoices and adjusting them on an individual basis, maintaining continuous communication with customers, and keeping track of invoices can end up consuming more time and resources than your A/R team can afford. Outsourcing allows your business to scale as needed and focus those resources on core businesses rather than hiring staff internally.

What is Accounts Receivable Outsourcing?

Accounts receivable outsourcing is when a company uses a third-party service to handle all or part of their accounts receivable operations. Depending on the volume of invoices, it could be handled by an individual or a team. This third party can be responsible for reports such as aging reports, scheduling payment reminders, tracking and collecting overdue invoices, and identifying high-risk customers to avoid extending more credit than they can realistically take on. In some cases, the accounts receivable outsourcing team makes decisions on matters such as partial payments for customers declaring bankruptcy or having other financial issues.

The Challenges of B2B Accounts Receivable Outsourcing

While accounts receivable outsourcing can help you lower costs and develop more efficient processes with higher rates of accuracy, it poses challenges as well.

They include:

Trusting the team with your customer relationships. Outsourcing accounts receivables means that you are moving part of the customer relationship to a third party that isn’t familiar with the earlier stages of the relationship. Third parties don’t have the same loyalty to your company or your customers
Anticipating future challenges. Since your outsourcing team is not familiar with your customers until further into the customer lifecycle, they may not be able to connect the dots with difficult or high-risk customers, putting your A/R team in a situation that might have been preventable had the accounts receivable outsourcing team remained in-house.
Ability to catch errors. Mistakes happen. The mistakes may cost you and may even get the attention of your customers. If you leave the day-to-day management of any part of your accounts receivable operation to a third party, you are liable for the mistakes but may not be aware of them until it is too late.
Protecting the data security and privacy of your customers. This is always a concern when you hand over financial data to a third party. You’ll need to ensure that the third party has best practices for security and compliance in place not only to prevent data breaches but to gain more trust with your customers and defend against future lawsuits.
Giving up control over a large part of the A/R process. When you rely on an accounts receivable outsourcing service, your success is dependent on the processes of the third party. In addition, any failures – such as a data breach or security incident – will affect your success as well.
Introducing contract terms that are inflexible. Some contracts have minimum engagement periods or penalties for early exits from the contract. The contract may also only include specific technology or tools, limiting the ability of your business to upgrade or advance to newer industry standards.

What is Accounts Receivable Software?

Accounts receivable software automates and streamlines manual processes in account receivables that consumes a company’s time and resources. It does this by automating mundane tasks such as payment reminders, gathering data on customer behavior, delivering real-time reports and updates anc accepting and processing payments. It may also integrate other components of the A/R process such as reconciliation, credit management, and provide payment options to customers. Using the analysis of all of the A/R data from these components, it is able to provide accurate data of customer behavior in real-time to better evaluate customer risk.

Why Choose A/R Software Automation Over Outsourcing Receivables?

The primary advantage of A/R software automation used by an in-house team over outsourcing receivables is that it allows your business to retain control over your accounts receivable operations while eliminating mundane tasks that take up your team’s valuable time. That means you can continue using your own inhouse team to build and enhance customer relationships. It also gives you the opportunity to hire more experienced people for your A/R team and engage them in work that is meaningful for you and them.

With A/R software, you’ll make the most of the resources you have without resorting to outsourcing and maintain control of your customer relationships. These are the key advantages you should keep in mind when trying to decide between accounts receivable outsourcing vs. A/R collection management software.

How AR Software Automation Eliminates Outsourcing Challenges

One of the big challenges in scaling your A/R process with your A/R team is that it drastically increases the likelihood for human error. The same challenge presents itself with outsourced teams, however, who typically hire additional staff to scale the collections process. A/R software automation, however, gives businesses a scalable process that eliminates much human error and inefficiency.

Other advantages A/R software has over outsourcing include:

It streamlines the entire A/R process. With an advanced automated A/R invoice-to-cash management solution that includes cash application, credit management, collections analytics and dispute and deduction management, your A/R process not only remains in-house and under your control, but integrates so that all the different components work together to deliver real-time data.
It consolidates A/R data into one centralized place. When all parties have access to A/R data such as outstanding balances, customer payment history and credit history, it’s easier to make informed, data-driven decisions as a team and continuously look for ways to optimize your collections strategy.
It maintains direct customer relationships with your A/R team. With an automated solution, your in-house A/R team can continue building precious customer relationships while seeking solutions to your A/R process or solution that may otherwise result in customer disputes and deductions.
It offers more flexibility. In contrast with an outsourced A/R team, automated A/R solutions can scale up or down as needed, and many integrate with the latest technology, such as a wide range of ERPs. More advanced A/R invoice-to-cash solutions integrate with both single and multiple ERPs to consolidate A/R data into a single centralized place.

How Gaviti’s Accounts Receivable Software Achieves Results

Gaviti’s A/R invoice-to-cash management platform automates the entire A/R process, giving you all of the benefits of an accounts receivable outsourcing service while eliminating the challenges. Its comprehensive solution includes several different modules that integrate together to optimize A/R performance while at the same time enhancing the customer experience.

These modules include:

- Credit Management and Monitoring. Send credit applications automatically to both new and current customers, streamlining the entire process of credit application and alerting your collections team in real-time of customers with increased risk.
- Cash Application. Get automatic and semi-automatic reconciliation of accounts with near 100% accuracy, eliminating the need for manual matching of payments to invoices. In addition to delivering real-time reconciliation with your accounts, Gaviti’s Cash Application module enables multi-bank connectivity so that you can manage cash from multiple sources, expedite the cash application process, and reduce processing delays.
- Collection Analytics. Gain real-time insights into performance metrics and KPIs, monitor both team and individual collections performance, and identify bottlenecks to implement targeted improvements. Create personalized dashboards to focus on metrics that matter most to your business.

Dispute and Deductions Management. Track, code, and classify deductions to gather insights from recurring disputes so that you can optimize resolution and close cases of the same type more quickly in the future. You’ll also have a comprehensive history and documentation for future analysis or in the event of an audit.

Want to learn more about how to automate the A/R process while improving your team performance? Speak to a Specialist to see how Gaviti works.