Managing money owed to your company from customers—that’s accounts receivable—can be incredibly labor-intensive. If customers don’t pay their bills on time, it can also disrupt/change your cash flow for that month. Many companies report that the process of chasing payments prevents their team from doing more important jobs, which is one reason why many businesses are now outsourcing accounts receivable services.
In this article, we will define accounts receivable services, explain how outsourcing accounts receivable works, and why outsourcing accounts receivable services is a growing trend for consumers. We will also share data and trends to help explain why this is happening.
What are accounts receivable services?
Accounts receivable services follow, manage, and collect money owed to a business from customers for services and products that have already been provided. Accounts receivable services might include:
- Sending invoices
- Following up on unpaid bills
- Recording payments
- Oops, managing payment plans
- Handling payment late fees and/or disputes (increased work on unpaid bills).
When you outsource accounts receivable services, a third-party company operates on your behalf, most time doing all the daily work for you. You still have control, but you don’t have to do all the daily work yourself.
Why Companies Are Outsourcing Receivable Services
Outsourcing is not just for payroll or IT anymore. An increasing number of companies are outsourcing their financial work to experts so they can:
- Free up time
- Get paid faster
- Reduce errors
- Improve cash flow
- Focus on sales, customers, and grow
According to a Deloitte report this year, 54% of companies outsource at least part of their finance or accounting work. The most frequent area was receivables and collections.
Example: Why It Makes Sense
Imagine you own a mid-size online shop. Every month, you send out hundreds of invoices. A percentage of your customers pay late. You or your team spend hours following up.
Now picture this:
- A dedicated service sends invoices out automatically
- It follows up on late payments via either email or phone
- You receive monthly reporting that shows who paid and who didn’t
- Your team spends less time chasing receivables
That is exactly what happens when you outsource receivable services. It relieves the pressure on your staff and ensures you have strong cash flow.
Benefits of Outsourcing Account Receivable Services
There are some compelling reasons to explore outsourcing receivables:
- Faster Payments
An outsourced firm will use professional tools and systems, and will have better systems in place to track invoices and minimize delays. Research suggests that organizations that outsource receivables will be paid as much as 30% faster than organizations that handle the receivables in-house.
- Reduced Cost
You avoid the expense of onboarding and developing additional staff responsible for receivables. In many cases, outsourcing accounts receivable can be less expensive than hiring and employing full time employees, and this is especially important for small businesses.
- Minimized Errors
Third party service providers have experienced teams focused on only receivables. This reduces billing errors, which in turn can lead to better trust relationships within your customer base and more expedient payments.
- Reporting
When working with third party services, you will gain detailed, accurate reporting. This reporting will allow you to accurately track the total amount received, what is overdue, what needs attention, etc.
- Focus on Your Core Competencies
Allowing outsourced partners to handle collections allows your staff to focus on more meaningful tasks and initiatives like sales, development of products, and customer service.
What to Look for in a Receivable Services Partner
If you are considering outsourcing, what should you look for before moving forward with the outsource service provider:
- Experience with your industry
- Excellent communication and reporting
- Trusted security protocols for handling financial data
- Flexible pricing or packages
- Software compatibility with your accounting software (i.e., QuickBooks, Xero, etc.)
You might also want to check reviews or ask for references. A good partner should feel like an extension of your team, not just another vendor.
Who Should Outsource?
Outsource accounts receivable services can be used by a variety of companies:
- New startups that don’t yet have a full finance team
- E-commerce companies with multiple customer invoices
- Services based companies (consultants, marketers, agencies)
- Manufacturing companies with large delays or payments
- In medical practices dealing with insurance and patient billing.
There are even large corporations that have used outsourced teams to assist or handle part of their receivables process.
Common Tools Used in Outsourced Receivable Services
When you outsource, the provider may be using any combination of these tools:
- Cloud-based invoicing software
- Automated payment reminders
- Customer relation management tools to manage customer information
- Secure payment processing platforms
However, many firms even offer integration with your current systems, so you don’t have to change everything.
Final Thoughts
Running a company is hard work, not to mention trying to chase down unpaid bills. Outsourcing your account receivable services will save you time, reduce your stress, and improve your financial well-being.
With so many companies searching for smart ways to handle their money, outsourcing receivable services is a widely accepted solution. It is no longer only an option for big companies. Small and emerging businesses can benefit, usually at a cost that is much lower than they may expect.
If you are spending too many hours on invoices, collections, or worrying about cash flow, consider the opportunity cost of outsourcing. Get a professional to handle the numbers and get back to managing and growing your business.
