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Originally published:
Jul-26-2005
View More Articles on Outsourcing
Regardless of size, no company can afford to write off thousands, or even just hundreds of sales dollars to bad debt. A recent survey by Accenture underscores this with 46% of senior executives listing accounts receivable and collections as the finance functions most critical to corporate success.
As a credit professional, you are aware of the challenges things like DSO, write-offs and cash flow bring to effective receivable management. Add to this tight budgets or downsized departments, and you really feel the crunch. One solution you may be considering to help with these issues is outsourcing -- at least a portion of your accounts receivable portfolio. (See “Outsourcing to Increase Cash Flow,” June 2005 Advisor.)
Once you decide to include outsourcing as part of your A/R management strategy, you have another, equally important decision to make – selecting a provider. How do you find an outsourcing provider that is a good fit with your particular needs and management style? One to which you can confidently hand off not only an essential source of revenue, but your most valuable asset, your customers? What does the “right” outsourcing firm look like?
Listed below are nine qualities and capabilities that describe the best first party, accounts receivable outsourcing providers.
What the Right First Party, A/R Outsourcing Provider Should Be
- A/R specialists – first and foremost. Large service and sales call centers like to think they can effectively manage late pay accounts. But, when given the opportunity, focus, training, and experience fail them, and they are generally unsuccessful. Effectively handling past due accounts is a specific skill requiring on-going training and experienced management. A reputable, receivable management firm with a well-trained, well-managed and experienced first party outsourcing department should always be your first choice.
- Compatible with your corporate culture. Both you and your provider should share the same views as to what is important. The way you handle your customers should be mirrored in the way they handle your customers. Outsourcing, when it works, is a partnership. You must be confident that you and your provider can work together to achieve maximum benefit.
- Capable of meeting your requirements. This seems obvious, but some providers may try to shoehorn you into their pre-set program. You need to stay in control. The right provider will be flexible enough to meet your specific needs.
For instance, if all you need is a short-term, clean-up project, some providers gladly handle smaller projects without requiring extensive contracts. If you have international accounts, there are firms that have bilingual collectors and specialize in first and third party collections abroad. If you have never outsourced your accounts receivable before and are not sure what to expect, find a firm that will do a two to three-month test project. You will be able to test the waters and determine reasonable expectations going forward.
Find an outsourcing partner that’s willing, and able, to work within your comfort zone.
- Committed to best in class processes and systems. If they can’t do it better and faster than you can, why bother? Do not look at costs alone when selecting a provider. Dozens of studies have shown that cost savings, by itself, isn’t enough to justify outsourcing your accounts receivable. However, the time saved, the detailed reporting, the effectiveness, consistency and professionalism that you can get from a really top-flight provider following proven techniques and working in a state-of-the-art system can be tremendous.
Outsourcing isn’t just about throwing more bodies at the problem. It’s about giving you a cost-effective means of staying on the cutting edge.
What the Right A/R Outsourcing Provider Should Do
- Customize their program to fill your requirements. A good provider will work with you to help define your needs and develop reasonable expectations. Based on this information, they will then develop a customer treatment plan to achieve your goals.
- Provide a program based on sound business rules, following proven techniques for account management.
- Assign a dedicated team of representatives, thoroughly trained in recovery techniques, dispute resolution and customer service. The provider will then train these reps in your systems and continue to monitor their effort to ensure your expectations are being met.
- Give you access to state-of-the-art receivable management technology. The management tool used by the provider should allow associates to track all activities and customer promises to assure consistent and timely follow-up. You should have the ability to view real-time activity on each account and communicate directly with the associates.
- Provide reporting that is transparent, meaningful and insightful. Your entire portfolio should be accessible via one database, preferably through an Internet interface. Statistical reports should be available and customizable.
Benefits You Will Receive
The reality of today’s business world is that cost-effective, efficient receivable management is a necessity for survival. Competition is fierce, resources are tight. Just a $500.00 loss, at a 5% net profit rate, costs $10,000 in sales! (See “Uncollected Dollars Are Threatening Your Survival,” July 2005 Advisor.)
Outsourcing all or part of your accounts receivable management process, to the right provider, should
- improve your customer relationships while training them to pay within your terms.
- give you the ability to right-size staff, ensuring qualified coverage for special projects, vacations, seasonal business upswings, etc.
- lower your DSO, decrease write-offs, increase cash flow, and improve the overall health of your company.
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ABC-Amega provides effective 1st party receivable management outsourcing solutions for projects small and large, short term and long, national and international. We’ve been doing it since 1989. If you’d like to speak to one of our representatives about how our solutions can help you resolve your issues, call 1-800-732-0206 or email info@abc-amega.com.
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