Accounts Receivable Outsourcing: Understanding Your Needs

accounts-receivable-outsourcing

Outsourcing your accounts receivable management is a big decision that can provide relief to common business challenges like increased delinquencies and a backlog of invoices or statements. But not all outsourcing vendors are the same. It’s important to select an outsourcing vendor that can help you reach your specific goals thoughtfully and in a timely manner. In this three-part series, we outline the factors you need to consider in choosing the best accounts receivable outsourcing partner for your unique needs. Today, we begin with understanding and weighing those needs.

  1. Define your collection recovery goals

A good vendor shouldn’t just collect. They should create a specific plan around your goals and brand to optimize recovery in a way that’s most meaningful to you and your stakeholders. Knowing where you need the most help will help you find a vendor with the capabilities to match. That starts with taking a close look at what’s dragging down your bottom line. Are you suffering from a classic 80/20 rule? Are write-offs a growing problem? Are you losing valuable customers in the process? Spending some time planning at the outset can prevent issues from selecting a misaligned vendor.

  1. Consider agency size

A smaller, boutique-style agency may help you receive more focused attention which can be helpful (and necessary) for companies new to accounts receivable outsourcing. They also tend to be more flexible in prioritizing things like developing customized agent training to fit niche or complicated industries rather than maintaining the status quo. A bigger agency, however, may be better able to handle the high call volumes and expanded staff that come with collecting larger past due portfolios.

  1. Configure the right staff

Whether you need to add additional staff to an existing internal team (yes, you can do that) or outsource a collections team wholly, the amount of staff you need to recover delinquencies largely depends on portfolio size and the complexity of your business.

Insurance, healthcare, and banking customers, for example, tend to have a lot of complicated questions they need answered before they feel comfortable paying their bill. This attention creates longer—but necessary—talk times. This complexity can be compounded by the age or size of your portfolio. The larger or older your portfolio is, the more staff required to skip trace, call each account, and follow up on payments.

  1. First party vs. third party

While most companies are familiar with third party outsourcing—when a vendor tackles your later-stage delinquencies on a contingency-based payment model—first party collections is a choice growing in popularity. After 90 days, the collectability of a past due account drops to less than 50%. Since first party outsourcing typically focuses on delinquencies aged 1 to 90 days, it’s a cost-effective way to balance a strategic, higher-recovery collections approach with your customer retention goals.

The soft-touch approach of first party outsourcing can also be appealing. Every year, many companies lose customers during the collections process either because of embarrassment or a poor collections experience, but it doesn’t have to be that way. It is possible to strengthen customer loyalty and product knowledge during the collections process if you select the right vendor.

Past due accounts and write-offs hit your bottom line hard. Accounts receivable outsourcing helps busy businesses and their leaders focus back on their core business, letting trained and seasoned professionals tackle the complex and ever-changing world of collections. Finding the right outsourcing vendor is essential to long-term success and revenue growth.

Stay tuned for the next post in this series: Finding Compatible Outsourcing Vendors.

 

Featured image: Shutterstock/venimo

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