Credit Control Outsourcing: Why You Should Remove All Doubts and Go for It?

Credit control is integral to a company’s larger finance and accounting function. Think of it as a strategic process instituted to ensure customers can make timely payments for the products and services they buy on credit. Therefore, businesses must maximize their credit management services’ potential to ensure they are not exposed to undue financial risk.

Why Do We Need Credit Control?

Credit control is directly related to cash flow. The better your company’s credit control process and the more stringent the control, the better the cash flow. This function ensures that you are extending credit to the right customer and not someone who cannot pay their invoice in time. The importance of credit control necessitates using credit control and management services, ensuring credit is extended to customers/clients that do not present a risk to your business.

Difference Between Credit Control and Management

Before moving ahead, there might be a fleeting doubt in your mind whether credit control and management are synonymous. The answer is no because there is a subtle difference. Credit control refers to the first step in the process wherein you are setting payment terms and ensuring that you are doing business with customers who not only agree to your terms but who will not renege on those terms when the time comes to pay.

Credit management is the next step in the process wherein you must make sure that customers pay on time, and you can prevent incidences of late or non-payment of dues; this happens through reporting, monitoring, and timely record-keeping.

Understanding the Credit Control Process

Credit control is critical to your business, and therefore, it is essential to understand the various building blocks that ensure a reliable process:

Collect Pertinent Customer Information:  Know your customer, including the legal name of the customer and the customer’s business entity; the personal address of the customer and their business; and also, all the billing information you need, including billing address and more. The focus should be on getting all the information required to ensure no invoicing mistakes happen

Due Diligence: How do you know the customer will make payments on time? You know this by checking the customer’s financial capacity to do so. You can evaluate this capacity by conducting credit checks that offer clear visibility into their finances, financial reputation, and every metric that can give you more confidence about their financial status or raise doubts.

Establishing Credit Limit:  Effective credit control is all about minimizing risk exposure. Therefore, you must draw red lines around the credit limit you want to extend to each customer. These can differ from one customer to another; for example, you will agree to an ‘X’ maximum outstanding amount for a customer who you know who has rock-solid financial health and can satisfy their financial obligation. In contrast, for another customer, ‘Y’ is the amount you predetermined because this customer runs a seasonal business, which can impact their financial health and in turn their capacity to pay.

Tracking and Monitoring: The financial condition of your customers evolves, and so should your credit control. Excellent payment terms extended to a particular customer might need to be pulled back, considering the deteriorating state of their business. For this to happen, you must keep performing regular credit checks. Not doing so will increase your own business’s risk profile.

Why Credit Control Outsourcing?

The credit control process is highly time-consuming, and accountants responsible for conducting due diligence and ensuring payment are received on time can spend a great deal of time on such tasks alone.  If they do so, they will not have enough time to focus on other strategic business initiatives. This is a problem because the salaries of accountants are rising in the UK, and you want your internal accountants to deliver value for money, and this can only happen if you can optimally leverage their expertise. This cannot happen if most of their time is cannibalized by just one set of accounting functions.

RELATED CASE STUDY: Streamlining Credit Control and Accounts Receivable for Leading Recruitment Business

Outsourced credit control services can help free up your internal accountants, as outsourcing accounting functions will mean your team has more time to focus on other complex accounting functions. More importantly, outsourcing also helps you scale your accounting departments quickly and cost-effectively. It isn’t easy to find the right talent, especially within budget. By outsourcing your accounting department, you can easily add a team of accountants to your internal team, thus enabling your business to pursue new growth opportunities without worrying about the increased pressure this will put on your finance and accounting department.

Removing Doubts Related to Outsourced Credit Control Services

It is natural to doubt the efficacy of an outsourcing approach to credit control. Let’s look at some areas of concern and try to dispel these concerns:

The knowledge and skill-sets of accountants: A reputed outsourcing provider can provide highly skilled accountants with focused expertise in credit control, and as a client, you can make sure you work with only those accountants qualified in managing credit control for business in your specific domain of operations. More importantly, the hiring process involves your team being able to interview these accountants so that there is no doubt in your mind about their ability to deliver reliable credit management services.

RELATED BLOG: 10 Qualities of High-Performing Credit Control Professionals

Being Able to Use the Same Technology: A leading provider of accounting outsourcing services will be able to work on the same set of software you are using in-house, so there is no dissonance. Moreover, you don’t have to spend time training your outsourced accounting department, and they can start working on your credit control requirements immediately.

Data Security: There is no doubt that the security of your data must not be compromised at all costs. Therefore, partner with outsourcing companies whose data processing activities conform to data protection regulations enshrined in GDPR and other data security regulations. You can make sure you only have a GDPR-compliant outsourcing provider.

RELATED BLOG: Credit Control Outsourcing FAQs: Everything You Need to Know

Towards Better Credit Control

An outsourced accounting department is only as good or bad as the outsourcing provider offering accounting services. The critical factor here is to work with an industry-leading outsourcing provider with expertise and experience in UK accounting practices, which includes credit control and management. QX Global Group depends on a three-pronged approach, including people, processes, and platforms, to deliver meaningful value addition as an outsourcing partner. With long-standing experience in offering outsourced credit control services, QX can scale your team effectively to optimize credit control.

Originally published Sep 29, 2023 06:09:53, updated Sep 29 2023

Topics: Credit Control Process, F&A Process Outsourcing, Outsourcing