The Case for Outsourcing Collections – published August 23, 2022 in Your Virtual Credit Manager

Don’t Overlook the Strategic Opportunity Provided by Outsourcing Collections

Small businesses have to deal with many of the same challenges as larger ones. A key difference (besides volume of transactions) is the lack of labor specialization. The employees of small companies tend to handle multiple responsibilities – the time devoted to each task can vary greatly as does the proficiency of the person handling those tasks.

Credit & Collection results suffer greatly from lack of attention and expertise. Perhaps more than any other small business function, Accounts Receivable (AR) Management gets put on a back burner because it is nobody’s prime responsibility.

Hiring an experienced full-time person to perform the Credit & Collection tasks may be simply unaffordable for a small or even a mid-sized business. What else can be done? Several options exist:

  1. Outsource the work to a company that specializes in AR Management
  2. Sell the receivables at a discount (e.g., factoring and other forms of AR finance)
  3. Purchase Credit Insurance, which will protect against bad debt losses (unpaid bills), but still requires you to mount a collection effort, will not improve your cash flow, and requires payment of insurance premiums

This article will focus on just the first option, outsourcing your collection efforts.  You can access the full article here