In the simplest of terms Accounts Receivables can be defined as the amounts owed by the customers for goods or services that a company allowed the customers to purchase on credit. The bigger businesses rarely operate on day to day or cash basis. Instead, they have a set time period, for instance 30 days or 60 days, before the customers are required to pay for the products they have received. That owed amount is known as accounts receivables for the business.
Accounts receivables are an asset, and are considered a source of cash. That is to say that that if accounts receivables go down, an important source of cash to be used in the near future goes down, harming the liquidity position of the business. They matter for the simplest reason that they factor in significantly in a company’s working capital and are among the decisive factors for business decisions, from marketing expenses to growth plans.
Managing Accounts Receivables
This might seem like an off-hand task but truth be told, management of accounts receivables is not an easy task. For starters, the record keeping for owed amounts in an operational business itself is a time consuming and attention worthy task, because any under invoicing means loss to the business and over invoicing means a bigger loss to the business by losing clients and their confidence.
Then comes the factor of collection. Making sales and recording higher unrealized revenues is not enough. In fact if a business is making too many sales without realizing the resulting amounts in cash or cash equivalents, it can very likely push the business to a credit crunch halting the provision of goods and services and also causing damage to the market competitiveness. At the same time the duration of the credit period that a business allows its customers has to be decided carefully considering the time value of money, the business cycle of the industry, and the financial health of the said business. All these factors require expertise and experience and cannot be decided over the top of the head. This is why every company’s finance department needs to have a team, or at least an individual, qualified and equipped to decide on credit period, ensure collection, and maintain error free records of all the sales and purchases made.
Outsourcing in Accounts Receivables
The decision to grow which department and keep which department in-house is a constant struggle for today’s businesses, especially medium and growing companies. This same potential costs versus profitability catch applies to accounts receivables as well. However, outsourcing almost always brings more benefits than it adds to the costs and here are the reasons how it can do so in the case under concern:
- As businesses grow, keeping accounts in-house and being handled by non-specialists can lead to mistakes in managing accounts, hurdle in preventing past due accounts, and may also lead to mistakes in updating newer accounts entering into collection status on a daily basis.
- Collection agencies or outsourcing companies altogether already have skilled teams on board that can manage customer accounts more efficiently and also have literal and metaphorical muscle to track down debtors who have relocated or fled without informing the businesses to which they owe money.
- Hiring companies to recover amounts that have already become doubtful or bad debts is always more expensive than preventing the problem of delayed payments or non-payments in the first place.
- Calculation of the time duration it takes your business to recover debts is a risky and sensitive job. If it is above, or even equal to, the industry average then that means you’re losing out on many opportunities that your competitors are capitalizing on. Only an expert in the industry and accounts can guide you through it and hiring a permanent resource is likely going to be much more expensive than simply taking an outsourcing company’s assistance.
- With an external company handling your accounts, not only the risk of mistakes goes down, but the secrecy and privacy of your accounts also improves.
- With professionally managed accounts receivables you get to have the information related to your financial health on your finger tips all the time allowing you more agility and flexibility in making business decisions and bringing in more clients.
How can Intersoft BPO help you?
Intersoft BPO not only has the required skill set you require to decide and maintain your credit cycles, but we also have just the right guidance and assistance you require to keep an uninterrupted order to cash payment cycle. From the moment you enter into a contractual agreement with your clients to the actual recovery of the money you are owed, Intersoft BPO has technical and human resource skills to ensure you don’t worry about your receivables. Get quotes today and reap all the benefits mentioned in the previous section, and more!