How outsourcing your accounts receivables will benefit your business in 2018
No matter what industry, all small businesses share the same goals of stable growth and maximising profitability. And they share the same responsibility when dealing with one of the biggest assets on their balance sheet, namely their accounts receivables.
Managing this part of the business is a time-consuming, often expensive and frequently stressful element of your business operations. This is why more and more small businesses are considering the option of engaging external accounts receivables management services. And outsourcing this part of your business operations can be an excellent strategic move, enabling you to reduce costs and avoid cash flow problems.
Cash flow issues are a leading cause of operating troubles for small businesses. To function properly, small businesses need consistent, predictable levels of cash flow. Yet having customers who are late payers is very common in the small business world.
While slow and non-payers can be dealt with by engaging a debt collection agency, it can be smarter to hire experts earlier in the accounts receivables process, so that all customers can be stimulated to pay bills faster – ideally, on time, every time.
Outsourcing your whole accounts receivables operation can help you to achieve a more stable, positive cash flow for your business. Here we outline 4 reasons why outsourcing your accounts receivables will benefit your business in 2018.
- Staff resource efficiency
Letting another firm take control of your accounts receivables not only means you are more likely to collect payments faster, but it also allows your staff to focus on doing their job. While many businesses have staff working on accounts receivables, they might not have the training or the experience to effectively do so. And you won’t need to invest in hiring a full-time accounts receivables resource in your small business if you take advantage of the services of an outsourced firm, which is usually far more cost-effective.
Your accounts receivables partner will leverage the maximum efficiency from your cash flow by using systems and processes that are proven to be functional and efficient. Collecting payments becomes less of a random, ad hoc approach and more organised and controlled. This leads to more predictability, better forecasting and oversight, and ultimately less cash flow problems. Meanwhile, you can focus on building and growing your business.
When you are busy dealing with customers and running the business, it can be a big relief to have experts handle the cash collection in a streamlined, structured way. Given the fact that cash flow problems are known to lead to mental health issues in beleaguered small business owners, the benefits of a reduction in stress cannot be overstated.
- They are the experts
It makes sense to outsource to people who can use their expertise to apply best-practices to maximise efficiency of accounts receivable processes.
When you enlist accounts receivables management services, they can focus on the details of your systems, recording each and every sale in order to be able to calculate DSO or “Days Sales Outstanding” (that is, how many days’ worth of sales remain unpaid in a time period). This kind of information helps your accounts receivable management partner to help reduce debtor days, ensuring your DSO doesn’t blow out and start affecting cash flow and business viability.
Apart from coordinating the handling of all your billing and reminders, if a customer is late in paying their account, then your accounts receivable firm will be straight on them, chasing up the debt and when necessary, promptly initiating debt recovery procedures. They’ll be able to devote the necessary attention to delinquent customers, at the right time. Having the professionals be tough on your customers’ means you don’t have to be, which can also help preserve your client relationships.
- Lowering costs
A dedicated accounts receivables management service can offer economies of scale and other ways of lowering the indirect costs of accounts receivables processing.
And having an accounts receivables partner means you can make the most of optimising technology and automation, without the necessary upfront investment. Automation of accounts receivables processes is known to lower operational costs and increase collection success. But it can often require putting up capital for IT resources, from purchasing to implementation to training and maintenance.
Instead, choosing to outsource your systems to a provider means you can deploy them faster at less cost. Rather than take years to evaluate, develop, install and implement an internal system, you can take advantage of technology and systems already in use with your accounts receivables provider. You don’t need to invest in intensive training and are not responsible for upgrade costs. And your organisation benefits from being a more efficient, more paperless office.
- You stay in control
Some small businesses worry they will lose control or oversight of their accounts receivables if it is not kept completely in-house. The fact is, small businesses usually oversee their outsourced accounts receivables provider more carefully than they do their own in-house accounts receivables staff.
Your accounts receivables management company is also driven by competition within its industry, motivating it to adopt best practices and quality assurance in its functions. A reputable accounts receivables management firm’s practices will be governed by internal control metrics, covering aspects such as time, cost, quality of work and error rate. This is likely to provide far greater oversight than the average small business’s in-house department will provide.
You’ll also be able to get a better view of your cash flow situation through being able to access the up-to-date information that your provider gathers, as well as financial reports they can provide. This allows you to identify problems faster and take action to deal with any potential cash flow issues.
More effectively controlling your accounts receivable and debt collection inevitably leads to growth and higher profits in the long term. So why not make your life a lot easier by outsourcing your accounts receivables management? At Marshall Freeman, we provide a range of professional accounts receivable solutions to reduce slow payers and increase cash flow, so if you want Australia’s leading collection specialists on your side, please call us on 1300 136 271 or enquire for a FREE debt appraisal today!