Solving the AR Dilemma: In-House Vs. Accounts Receivable Outsourcing

The problem with outsourcing is that there are always doubts about whether the outsourced tasks can be done in-house or, to be more specific, are better managed with internal teams. Because of the sensitive nature of accounting tasks, these doubts go into high gear regarding finance and accounting (F&A). Accounts receivable (AR) is one of the most critical processes of F&A, as the efficiency of AR is directly proportional to the strength of your company’s cash flow. As a business leader, you will be aware of the cash flow problems experienced by businesses in the UK, and it is important not to dismiss such problems as small business problems. If your AR process is inefficient, even your business can suffer from such issues irrespective of its size, scale, or scope.  

To optimise accounts receivable and ensure its potential is maximised, companies choose to leverage accounts receivable outsourcing services and most benefit from this move. If you are struggling with AR and wondering whether in-house is the way to go or you can use an outsourced team of accountants to manage the gamut of the AR process, this article is for you. But before we move on to discuss in-house vs. outsourcing, we will take a quick look at why AR optimisation is necessary in the first place and the problems impacting AR. 

What is AR optimisation? 

Your company needs working capital to manage its business needs. If your AR process is not managed well, your business can face liquidity issues. This can impact your business’s ability to pay its vendors, invest in other growth avenues, and make sustained investments in the betterment of the company, such as people, processes, and platform.  This is why the efficiency of AR is supercritical for a business and has a meaningful role to play in driving business growth and mitigating financial risk. 

How Do You Optimise Accounts Receivable? 

The critical determinant of optimising accounts receivable is whether your company can build capacity in its AR team to meet the growing demands of your business. Accuracy and timeliness are the key drivers of an efficient AR process, and this can only happen if you have a team of highly qualified and experienced accountants that can be scaled on demand. Another critical aspect is the capability to invest in technology to improve key processes with automation-driven workflow tools to reduce manual intervention in repetitive tasks and increase process velocity to enhance productivity.  

What is the Biggest Problem with Accounts Receivable? 

The biggest problem with AR is a company’s inability to look at it strategically and make focused improvements in the overall AR process. This limitation also stems from the difficulty in scaling the AR process with the required number of team members. Teams are stretched thin, which results in efficient processes that do not deliver the necessary value. This results in tell-tale signs that point to inefficient AR, like lack of follow-up, inefficient invoice chasing, bad reporting, etc.  

Accounts receivable outsourcing services help address many challenges through capacity building, process improvement, and platform upgrades. However, companies have trust issues with outsourcing or believe the AR process is better off if managed in-house. 

The Argument for In-House AR 

The most potent argument for in-house AR is managing and controlling this process better and getting improved and on-demand visibility into the AR process’s various facets and the cash flow. This visibility helps you better understand the cash flow and allows you to leverage predictive modelling to forecast cash flow; this enables you to plan finances better.  

Another argument in favour of in-house AR is that there is no problem with transparency. You know what is happening, and your team can take immediate corrective action rather than going back and forth between external and internal groups for problem resolution.  

The third argument is that you have all control over your data, cross-pollinate it with other internal data sources, gain better insights into the overall finance and accounting process, and make it a strategic growth driver of your business.  

Undoubtedly, the case for in-house AR is very strong, but the case for outsourcing is equally strong or stronger by a few notches.  

The Argument for Accounts Receivable Outsourcing 

Outsourcing accounts receivable is an excellent way of building capacity and not struggling with the problems associated with scaling your team quickly, such as talent shortage. A growing business demands AR that can be scaled to meet its needs; otherwise, over time, the business’s financial demands cannot be met on time. With outsourcing, you not only build capacity, but with a reputed outsourcing provider, this capacity is founded on trust. Reputed accounts receivable outsourcing companies can be trusted to deliver all the information needed to drive efficiencies into your AR processes. Your company can leverage several communication channels to stay on top of the AR process and harness customised AR reports to get a ringside view of the cash positions and the impact of your outsourced AR team on this process.  

You must also understand that outsourcing companies adhere to strict SLAs, NDAs, and stringent security protocols. You set the tone of the relationship and identify the key deliverables and metrics on which their performance will be judged. For example, customer setup and maintenance are key AR activities, and the comprehensiveness and speed of this process could be critical benchmarks.  

Accounts receivable outsourcing services help you scale quickly and benefit from accounting transformation with advanced technologies such as AI and ML that automate processes, drive real-time analysis, and accelerate decision-making. Such tangible value is further boosted with cost-effectiveness as you benefit from labour and cost arbitrage.  

It is natural to think of getting AR done in-house for better control and the sensitive nature of the information that needs to be shared with a third party. Still, if the outsourcing provider provides the same control and data safety, moving the needle in favour of accounts receivable outsourcing makes business sense.  

The Right Relationship is Crucial 

There won’t be any in-house vs. outsourcing debate amongst decision-makers if they consider outsourcing the AR department a strategic move rather than a purely money-saving approach. When you work with the right accounting services provider, you essentially onboard a team of outsourced accountants who might add new skill sets to your accounting department. Moreover, you can outsource AR and other processes that make up the O2C cash cycle. By doing so, you are saving money and freeing up the valuable time of your internal staff, who can work on accounting tasks with strategic value.  

QX leverages the best talent, accounting approaches, technologies, and a proven track record of servicing the accounting needs of companies across the UK to deliver outcomes-focused accounts receivable outsourcing services. QX provides services aligned with clear performance benchmarks and SLAs to support your company’s cash flow goals.  

Contact QX to learn more about how we can help you overcome your accounting outsourcing fears and usher in a new era of AR efficiency. 

Originally published Nov 28, 2023 05:11:16, updated Nov 29 2023

Topics: Accounts Payable Process, Finance & Accounting Outsourcing