Enhancing Compliance and Collection Standards Through Outsourced Credit Control

Professional credit control is critical for businesses of any size, scale, or scope to maintain a healthy cash flow, foster stronger supplier relationships, and enhance market credibility. Credit control management becomes even more important when you consider that approximately half of US businesses experience the ‘overdue invoice problem.’ This inefficiency can impact accounts payable, preventing timely payments to suppliers, vendors, and lenders, thus increasing pressure on the business.

While businesses can invest in better credit control experts and improve processes, these changes are often time-consuming and costly, with no guaranteed improvement.

The answer, often then lies in working with a third-party partner that offers outsourced credit control services.  The business can work with an outsourced credit control team with the required expertise and experience to strengthen its internal credit control framework. Your business can benefit from labor arbitrage and improve the key components of credit control, including credit risk assessment, credit decision-making, credit monitoring and control, invoice chasing, cash allocations, reporting and analytics, and more.

It is imperative to think strategically while deciding to improve credit control management and not just choosing to outsource based on outsourced credit control costs. Therefore, another benefit you must consider is enhancing compliance and ethical standards with outsourcing.

Let’s dig deeper into how outsourcing can improve this aspect.

Enhancing Compliance and Ethics with Outsourced Credit Control Services

Extending credit has a significant bearing on business success. Extending favorable terms to customers with sound financial health can improve cash flow. On the contrary, adding risky customers to the roster can weaken cash flow, posing problems. But, identifying the right customer to do business with is just the start. Your credit control team should be able to comply with the numerous industry regulations as a part of its efforts toward establishing a professional credit control.

Compliance with these regulations can be challenging, but your outsourcing partner won’t encounter such obstacles. One of the service level agreements (SLAs) in the association with the outsourcing firm would be adherence to necessary rules, including:

• The outsourced team will consider the Equal Credit Opportunity Act while extending credit. Under this act, a business cannot refuse credit to customers based on national origin, race, color, age, marital status, or gender, provided they meet the necessary financial health parameters.
• Your outsourced credit control services partner will also have to keep in mind the Truth in Lending Act, which makes it mandatory for your business to disclose complete information (terms & conditions) of the credit offer. This can include payment dates, penalties if invoices are paid late, and more.
• Businesses must also comply with the Fair Credit Billing Act, which mandates they must adhere to a specific procedure to address disputes in credit billing. If the customer identifies an error in the invoice or has some other issues with it, they have a period of 60 days, within which this error or dispute should be notified to your business. The response should be sent within a 30-day time frame, which is absolutely crucial, and your business also has a 90-day time frame to address the problem or explain to the customer why there are no errors in the invoice.

Complying with these acts requires credit control teams to be aware of them and ensure they can follow them. The firm offering outsourced credit control services will ensure its process meets all compliance requirements.

Maintaining Ethical Standards in Debt Collection

Another critical aspect of compliance and ethics in credit control is how your business pursues late customer invoices, commonly known as ‘debt collection.’ Strict rules govern debt collection best practices:

• The business must contact the customers via phone to inform them about the initiation of a formal debt collection process.
• If payment remains outstanding, indicating unresolved debt, the business must formally notify the customer in writing of the initiation of a debt collection process against them.
• It is imperative that while chasing invoices, the business doesn’t harass the creditor with constant phone calls.
• The customer shouldn’t be threatened with arrests.
• Threatening legal action is also not permitted.
• The business should not attempt to collect an amount exceeding the debt owed.

These and other practices, including state-specific laws, should be considered when pursuing customers for unpaid invoices. A reliable and reputable outsourcing partner will assist your credit control department in adhering to industry best practices in credit control.

RELATED CASE STUDY: Streamlining Credit Control for Leading Recruitment Business

How does Outsourcing help Drive Better Credit Control Compliance?

When evaluating outsourcing options, it’s crucial to consider not only the outsourced credit control costs but also the skillsets of the outsourcing partner. The ideal firm will adopt a people, process, and platform approach to optimize credit control.

A team of skilled and qualified credit control professionals will serve as an extension of your team. They possess the knowledge and practical experience needed to meet demanding compliance norms. Furthermore, leveraging automation and technologies like AI/ML enables them to maintain the highest ethical standards in managing your business’s credit control.

Outsourced services ensure impartiality, timely query resolutions, polite and respectful communication with customers, accurate information maintenance, and due diligence to meet legal requirements.

QX offers outsourced credit control services with the primary aim of aiding your business in receiving timely payments. We combine credit control best practices with process excellence to ensure the strictest compliance and ethical credit control services.

Originally published May 15, 2024 10:05:49, updated May 15 2024

Topics: Credit Control Process, Finance & Accounting Outsourcing