Should I outsource my credit control and collections to a third-party?

Keeping bad debts to a minimum and optimising cash flow are vital to the success of any business. In order to achieve these goals, it is essential to set up a good credit control system and adhere to best practices.

This is easier said than done. Credit control may require inputs from various accounting functions and is often seen as a burden by the people who have their hands full with other critical tasks. For instance, in smaller firms, the task of collections is often shouldered by a bookkeeper – someone who is meticulous but not really trained in customer relationship management. Someone in this position often doesn’t have the motivation, time or skills to act as a collection agent.

By outsourcing your credit control or the entire receivables process to experts, you can get access to quality and reliable credit control services and really focus on reducing your debtor days.  From our observation, credit control outsourcing can deliver the following benefits to businesses:

1. Move revenue, less bad debts, better cash flow 
For small enterprises and SMEs that do not have a mature credit control department in place, outsourcing gives direct and immediate access to professional and reliable services.  Through systematic and detailed record keeping of clients, gentle due date reminders, quick resolutions of queries, polite but firm follow-ups (calls, emails and letters) for late payments, escalations, and dunning letters & statements, a dedicated credit control expert can significantly reduce late payments and bad debts without harming the relation with your customer.

2. Reduced cost of operations 
Even the simple task of collections incurs a number of costs – personnel, paper documents, databases, software, and more.  Plus you require regular knowledge upgrades to keep up to date and comply with laws around collections. With an outsourcing partner, the entire credit control process can be streamlined while reducing the cost. Whether you go for a transaction-based model, hire a dedicated resource, or pay a percentage of the collections, you benefit from a better level of service at a reduced overall cost.

3. Access to best practices, technology and security 
When you are dealing with a large number of clients or customers, having the right technology in place can simplify and automate many of the tasks related to credit control and collections. While it may be difficult for a small business or SME to get the ROI on credit control software, an outsourcing agency already has in place software that simplifies the task of invoicing, collections, reporting and review.

4. Better recordkeeping and documentation
As a part of standard practices, most credit control and collection agencies make a record of all their communications with the clients. The availability of these records makes it a lot easier for you to successfully pursue a legal case against a client, if required. Even if you choose not to go the legal route, the documentation will be helpful in claiming your bad debt as a legitimate tax deduction.

5. Better customer relationship management 
When you choose a specialist credit control agency, you get access to staff that is trained in managing customer relationships. In addition to following the best practices for maintaining customer relationships, the credit control agents are trained in timely and effective customer query resolution. Their focus on collecting payments without harming customer relationships ensures a better customer experience.

Wrap up
If it seems that we have painted a rather rosy picture of outsourced credit control and collection services, you are right. You can reap the above benefits – but only if the outsourcing partner has the experience and capability to deliver superb services. As long as you choose the right outsourcing company for your credit control or collection requirements, these benefits are right within your grasp so make sure you check their experience with customer testimonials from the outset.

Want to know more about how outsourcing credit control can benefit your business? Please get in touch for personalised advice from our experts.

Originally published Jan 13, 2017 07:01:51, updated Jul 23 2024

Topics: Credit Control Process