Outsourcing for your receivables management?
Why do things you don't specialise in, when there are other companies that are experts in them? It is a thought that has prevailed among many entrepreneurs and companies for years. The focus is rightly on the core business and the rest can be outsourced. For things like cleaning, catering and technical maintenance, this is already almost standard, but increasingly, debtor management is also being outsourced. To come to a good decision on this, a sound consideration be made.
Benefits of debtor management outsourcing
The main advantages of outsourcing receivables management are:
- Cost reduction; outsourcing to an external party should in principle reduce costs, partly because of the economies of scale a supplier has.
- Quality increase; outsourcing party has specific knowledge of receivables management and invests in resources, people and knowledge. Knowledge that is probably more difficult for your company to secure within your organisation.
- Fewer worries; you don't have to worry about debtor management (on a daily basis). This allows you to focus on the vital business functions and core business, improving it.
- More flexibility; By outsourcing receivables management, your company creates a flexible pool of employees. Then, peaks and troughs can easily be absorbed without you having to hire or fire employees yourself.
Disadvantages of outsourcing receivables management
Outsourcing debtor management obviously does not offer only advantages. Below, we list the main drawbacks.
- Dependency; As a company, you are dependent on the quality of the supplier. Adjustment is difficult because you have no direct control over or direct visibility of the work delivered. So it is very important to make good agreements (beforehand) and to agree on sharp targets together.
- Loss of expertise; when certain activities are outsourced, there is a risk that the knowledge and technology needed to carry out these activities disappear within the in-house organisation.
- Less grip on costs; this disadvantage especially plays a role when there is too much dependence on one supplier (which therefore has a 'dominant position' and could exploit it).
- Less impact on quality; while the outsourcing organisation remains ultimately responsible for the results, it has no direct influence on the quality of the outsourced activities. Also, a supplier may sometimes lack the knowledge of your industry, so you can still spend a lot of time informing the supplier.
To outsource debtor management or not?
The key question, of course, is: should I outsource my debtor management or not? We cannot give a straightforward answer to that. The answer depends on the choices you make and what you or your organisation considers important. Do you want to stay flexible and not have to worry about anything? Then outsourcing is a good option. Do you prefer a bit more control? Then outsourcing might be less obvious. Costs also play a role: which activities do you outsource, what will it cost on an annual basis and could an in-house employee do it cheaper? To reach a well-considered decision, you need to look at the matter from several angles.
5 things to look out for in an outsourcing contract
To help you get started, we list below five key aspects you should pay attention to when entering into an outsourcing contract.
1. Carefully weigh up costs.
Pay attention to the relationship between price, performance and quality. Always compare the cost of outsourcing with the cost if you were performing the tasks internally. To estimate this, you obviously need to be well informed about the quality of your own company, but also about actual aspects such as the number of invoices per year and the specific work involved in your specific debtor management.
2. Make clear agreements on all aspects of outsourcing.
Not only about price, product and performance, but also about the time schedule, delivery terms, payment terms, guarantee provisions, contact persons, the division of responsibilities, safety regulations, penalty and/or premium arrangements, dispute settlement, et cetera. Also determine whether the focus is on invoicing or on reminders and dunning. It is important that you are really on the same page on this, as this forms the basis for good cooperation.
3. Trust and a somewhat similar corporate culture are important.
This aspect is largely a matter of intuition. Make sure you at least get a complete picture of the culture, working methods and contacts of a company you want to engage with. When two parties do not like each other in the basics, cooperation becomes difficult.
4. Avoid becoming completely dependent on one company.
This can be done, for instance, by keeping a small part of the activities in-house. Make sure not all knowledge about the outsourced business processes disappears from your organisation. The external party will need to be steered and checked, so at least retain sufficient knowledge to be able to perform that steerage and check properly.
5. Pay attention to aftercare.
We hope this will give you enough guidance on issues to consider when coming to a decision. Need additional information or a sparring partner? Our specialists are experienced in guiding you through this type of process. We are happy to review with you Whether it pays for you to outsource debtor management or not.
Compare debt management providers
Have you decided to outsource your accounts receivable management? Then make sure you always talk to multiple providers to compare which provider has the best agreements, terms and conditions and way of working based on your organisation. Do you need help finding the right party? Xolv will help you find the right match. Wondering how we can help you? Then get in touch with us.
