Topics: Accounts Receivable Process, Finance & Accounting Outsourcing

Strategic Savings: Accounts Receivable Outsourcing to Optimize Operational Costs

Posted on May 13, 2024
Written By QX Global Group

accounts-receivable-outsourcing-cost-savings

Accounts receivable outsourcing services is a popular method for improving business cash flow. Between 2024 and 2030, the global finance and accounting (F&A) business process outsourcing market is poised to grow by USD 65.9 Billion. This figure clearly demonstrates that businesses worldwide are leveraging F&A outsourcing to benefit from a range of efficiencies, including a robust accounts receivable (AR) framework.

With outsourcing, your business benefits from both labor and cost arbitrage. While this is a well-known advantage of outsourcing, this article aims to dig a little deeper into the savings aspects to help you consider it strategically with a long-term vision, rather than through the limited prism of reducing costs.

Assessing In-house and Accounts Receivable Services Outsourcing

According to the Bureau of Labor Statistics, labor costs have increased by 4.2% year-on-year. Consequently, hiring in-house accountants is becoming increasingly expensive. Thus, the critical question arises: Can your business afford highly qualified accountants as their salaries continue to climb? More importantly, you have to battle the shortage of accountants, which might impact the business’s ability to scale its team.

Businesses that trust outsourcing, or those fearing loss of control over their F&A functions by delegating tasks to a third party, must evaluate the costs of their internal accounting operations. By evaluating the cost implications and comparing them with the outsourcing expenses and benefits, they can determine the strategic savings delivered by accounts receivable outsourcing services.

RELATED BLOG: The Executive’s Guide to Selecting an Accounts Receivable Outsourcing Partner

The Cost of In-House AR

Managing accounts receivable in-house involves several significant costs:

  • Personnel Expenses: Salaries, bonuses, training, and increments.
  • Tech Infrastructure: Ongoing investment in IT infrastructure, software, and hardware.
  • Tech Updates: Constant need for technological updates to enhance the accounting tech stack.
  • Resource Drain: Intensive AR tasks consume time that could otherwise promote business growth.
  • Performance Tracking: Costs associated with software to monitor and evaluate accounting team performance.
  • Process Inefficiencies: Legacy processes create information silos, extending task completion times and incurring unnecessary costs.
  • Operational Delays: Inefficiencies in AR processes lead to late payments, resulting in penalties and damaged supplier relationships.
  • Scalability Challenges: A small AR team may struggle to manage tasks efficiently, increasing the likelihood of errors.

The root cause of many issues within AR is the operational framework. To address these, businesses should focus on enhancing AR operations by employing accounts receivable specialists and adopting processes and platforms that utilize the expertise of skilled accountants, standardized procedures, and advanced infrastructure. This approach aims to make AR management more efficient and cost-effective.

Savings and More with Accounts Receivable Services Outsourcing

The primary reason businesses outsource accounts receivable (AR) is to achieve significant cost savings. These savings can then be reinvested into other areas of the business to drive growth and enhance operational efficiencies.

How Outsourcing AR Drives Cost Savings

  • Reduced Employee Costs: Outsourcing enables your business to scale quickly without the high costs associated with hiring and maintaining an internal team. This labor arbitrage significantly lowers employee expenses.
  • Strategic Resource Allocation: Freeing up your internal accounting staff allows them to focus on strategic initiatives that enhance business revenue and profitability. This not only optimizes the use of your talent pool, reducing turnover by engaging employees in more meaningful work, but also helps in retaining skilled staff, thereby saving on recruitment costs.
  • Enhanced AR Efficiency: A dedicated team of accounts receivable specialists can accelerate debt collection, streamline invoice generation, improve query resolution, and enhance reporting. Introducing advanced technology like AI and ML further automates and refines these processes, leading to increased productivity, speed, and accuracy—all contributing to substantial cost reductions.
  • Continuous Technological Advancement: While 66% of businesses plan to increase IT spending in 2024, budgets are often spread thinly across many needs. Outsourcing ensures access to the latest technology in accounts receivable management without the burden of large capital expenditures, helping maintain a competitive edge.
  • Improved Compliance and Risk Mitigation: Outsourcing can enhance compliance with regulations and improve risk management, preventing costly penalties and losses associated with non-compliance and data breaches.

RELATED CASE STUDY: Do you know that QX worked with a leading healthcare recruiter to optimize and digitize their AR function? Read the case study here

To truly harness these strategic savings, partnering with a reliable and experienced accounts receivable services provider is crucial. QX, as a leading provider, brings extensive experience and a proven track record from working with diverse clients across the United States. We are dedicated to helping you achieve your cash flow objectives through efficient AR management. Our proven People-Process-Platform approach allows us to tailor our services to address your specific organizational challenges – get in touch to know more about our capabilities and kickstart your finance transformation journey!

 

FAQs

Q. How can a company improve accounts receivable?

Ans: The first step any company must take to improve accounts receivable is to conduct a thorough SWOT of their existing AR process and identify its weaknesses and costs. Then, set about evaluating the pros and cons of making improvements in-house and plugging the gaps by hiring better accountants, investing in improving technology, and implementing a slew of changes that drive AR process quality. If you think this will be cost-intensive and largely unmanageable, it is essential to look at accounts receivable outsourcing service as a great way of improving accounts receivable.

Q. What are the five steps to managing accounts receivable?

Ans: The five critical steps of efficient accounts receivable management are proper credit control, timely invoicing, optimal collections management, quick dispute resolution, and reporting. You benefit from a high-performance AR process only when all five steps come together and are efficiently executed.

Originally published May 13, 2024 09:05:04, updated May 13 2024

Topics: Accounts Receivable Process, Finance & Accounting Outsourcing


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