March A/R Madness: Solving Accounts Receivable Issues with First Party Outsourcing
March Madness kicks off Tuesday (Go, Musketeers!), and to make it to the finals, it takes years of experience and dedication, a whole lot of strategic planning and teamwork, and of course sweat equity. Solving accounts receivable issues is no different. If you want to sweat a little less over your receivables, first party outsourcing is a great option to stop the madness. Here’s five big ways first party outsourcing can help solve accounts receivable issues for your business, letting you go back to focusing on what you and your business do best.
Early intervention for early-stage delinquencies
When accounts start to go past due, too many companies look ahead to third part collections—but many times that hand off doesn’t happen until 90 or even 120 days have passed. Each day that passes, you’re diminishing your returns from that account. According to the Commercial Collection Agencies of America, waiting 90 days can greatly reduce the collectability of an account and drive down returns by as much as 30%.
As an account ages, the accuracy of demographic information like phone number and address decreases as customers move and change numbers. It requires greater effort to recover—more time, staff, and skip tracing tools. Intervening in the first 30 days gives you the greatest chance of recovery. The more accounts you can get back into good standing now, the fewer the accounts you’ll need to pass along to third party collections, and the more whole dollars you stand to recoup.
Re-allocation of resources and investment are two of the biggest reasons more companies don’t engage fully in early-stage collections. With first party outsourcing, there’s no need to spend your own money on expensive customer-centric technologies or even your own time and resources creating a specific training program. A reputable vendor will be able to help you design a program tailored to your needs like call volume, portfolio size, and accounts receivable goals. You just pay per call or FTE.
Generates long-term financial benefits by retaining customers
The collections process, regardless of how easy or friendly you design it, always leaves a bad taste in customers’ mouths. Sometimes they’re embarrassed. Sometimes they think your processes are the reason they’re past due. Whatever the case, first party collections offers a soft-touch collections approach. It often feels more like a friendly reminder that they’ve missed a payment than a collections call.
You can even use it as an opportunity to remind account holders of customer-friendly options you may offer like auto-pay and payment reminder texts and emails. If you don’t have any of these in place, then your outsourcing vendor should be able to help you create some of these loyalty-earning service options.
Trains customers to make future payments on time
You don’t just want to be concerned with today’s past due receivables, you want to think proactively to stop the same customers from going delinquent in the future. Habitually late customers are bad news for your bottom line. By reaching out early with a live agent, you’re telling your customers you’re on top of your receivables and you’ll follow up. To avoid that call, those who can will likely re-prioritize your bills ahead of others, making sure you get paid first.
Easily identifies friction points that contribute to delinquency
Going back to #3 for a second, sometimes your processes are part of the reason why customers struggle to pay their bills on time. Maybe your invoices could be a little easier to understand. Maybe your customer service line has too long of a wait time that customers just give up. A first party outsourcing vendor will help you identify these common friction points that are enabling delinquency and help devise a solution to rectify and overcome.
When your A/R feels chaotic and messy, you risk your entire business feeling chaotic and messy too. A/R madness raises uncertainty and increases pressure on your sales team to make up for lost revenue. But solving accounts receivable issues is more than just collecting those past due accounts. It’s about getting the most from what you recover and looking for ways to prevent delinquencies in the first place.