Accounts receivable (A/R) serves a critical function in your business — namely to ensure consistent and accurate cash flow. There are many challenges for those responsible for A/R, and having a dedicated staff to manage them is helpful. Unfortunately, the overhead cost can be prohibitive for some businesses. In those instances, working with a third-party company that can provide the knowledge, experience, technology, and resources to overcome those challenges can be your best solution.

Challenges of A/R management

Accounts receivables are likely one of the biggest assets your business has, which is why managing them is so crucial to your business’ success. A/R allows you to pay your bills, salaries, and operating expenses and keep your company healthy and growing. But A/R management presents many challenges that you must overcome to keep your company running smoothly. For example:

  • Staying on top of accounts receivables and monitoring for early signs of payment problems.
  • Resolving billing disputes.
  • Addressing invoicing mistakes or missing information.
  • Reconciling payments to invoices.
  • Sending invoices to the proper person and following up.
  • Maintaining valuable business relationships while collecting overdue accounts.

At the root of all these challenges is a lack of resources (e.g., time, staff, technology).

Benefits of outsourcing A/R

Often, relegating A/R management to an in-house accounting staff can mean extra work with fewer profits. Outsourcing to a reputable third-party A/R company that has experience in all aspects of A/R as well as its challenges may be your most cost-efficient option.

The efficiencies gained by outsourcing A/R to a third party will not only lower your accounting and labor costs, but free up staff to focus on core business operations and growing the business as well. An outsourced A/R management company can help your business:

  • Speed up payments to keep cash flowing into your business.
  • Monitor accounts for early signs of financial problems.
  • Take steps to intervene by contacting the appropriate person and negotiating mutually beneficial payment terms.

Although you never want to send an account to collections, when necessary, the earlier you do, the better the chances of receiving full or even partial payment.

An experienced A/R partner can limit your credit risk by creating a written credit policy and assessing the credit worthiness of customers before extending credit. Additionally, an A/R partner can often provide the latest technologies and automation software to speed up processes, reducing errors and invoicing mistakes.

And one of the biggest benefits of outsourcing your A/R to a third party is that the third-party company handles any contentious interactions with the customer, so your positive business relationship with the customer remains intact.

Choosing an AR management company

Choosing an A/R partner is much more than finding the one with the lowest rates. Do your research and find a partner that best fits your needs and provides the best return on investment (ROI).

Some additional considerations include:

  • Good reputation for providing high-quality A/R support in your industry and customer demographic.
  • Consistent account monitoring to detect problematic accounts early.
  • Knowledge of state and federal regulations.
  • Usage of the latest technology and automation software.
  • Maintain thorough and accurate records.
  • Understand the importance of maintaining your brand’s reputation.

If you’ve decided that outsourcing your A/R management is a good option for you and your bottom line, you have a big decision ahead. Finding an A/R management partner that is well-suited to your business is crucial for the health and future growth of your company. The knowledgeable experts at MSCCM can help you stay on top of your A/R while easing your headaches and the strain on your staff and time.

Need help managing your commercial credit risk? MSCCM financial experts can assist you. Contact us today.