Managing the lifeblood of any business—cash flow—requires a thorough understanding and robust control over Accounts Receivable Management. Despite its crucial nature, many organizations find it challenging to implement effective accounts receivable management due to its complexity and labor intensive nature.
Before we delve into the significance of accounts receivable management, let us understand the reason for its necessity.
Accounts receivable process is only applicable to businesses that provide credit facilities to their customers. Despite the invoice being generated, the customer is given a time period to pay for the amount due for the services or products he/she has availed. The credit arrangement is established to guarantee a seamless inflow of working capital into businesses. This practice of conducting transactions on credit terms gives rise to accounts receivable management.
What is Accounts Receivable Management?
Management of accounts receivable is the method employed by businesses to make sure their customers settle their outstanding balances promptly. This practice is key in safeguarding businesses from experiencing a working capital crunch at any moment. Moreover, it deters delayed payments or defaults from customers and bolsters the financial and liquidity status of the business.
Effective receivable management enhances profitability by minimizing the likelihood of incurring bad debts. Moreover, comprehensive management involves more than just reminding customers and gathering payments on schedule. It also necessitates uncovering the causes of these delays and devising strategies to address such problems.
According to the Atradius Payment Practices Barometer survey, 3% of B2B receivables were defaulted on, with 30% of invoices experiencing late payments, and 12% exceeding two months overdue.
As a business owner, strategizing your accounts receivable management is of paramount importance. However, not every business has the resources and manpower to have an in-house accounts receivable management set up. This is where outsourcing the accounts receivable collection process to industry pioneers like First Credit Services can prove to be a game-changer.
Why Outsource Accounts Receivable Management?
Despite the technological advancements that have graced the finance sector, most of the accounts receivables management is done manually. This makes it prone to multiple manual errors, takes up valuable time and resources. Outsourcing accounts receivable management services to First Credit Services can yield numerous benefits:
Improved Cash Flow
A collaborated report titled “Working Capital Playbook” by PYMNTS and YayPay revealed that 93% of businesses are encountering delayed payments from their clients.
Strategic accounts receivable management prioritizes timely collections by monitoring invoices and payment deadlines, sending reminders, and actively following up with customers. This ensures that funds are received within the expected time frame, maintaining a consistent cash flow.
A faster collection process not only sustains operations and growth but also reallocates resources for crucial needs.
Outsourcing AR can help businesses save money by eliminating the need to hire and train in-house AR staff, as well as by reducing the need for dedicated infrastructure. This can free up businesses to focus on their core competencies and improve their bottom line.
Professional Accounts Receivable Management (ARM) companies are familiar with local, regional, and international collection laws, minimizing the risk of legal issues. This integration also aids in precise cash flow forecasting, which assists in predicting liquidity issues and making informed cash management decisions.
Enhanced Customer Service
Outsourcing firms typically have dedicated customer service teams, allowing for more personalized, prompt, and professional interactions with your customers. The above-mentioned report also reveals that 75% of companies reported superior
customer experiences after leveraging enhanced AR management.
Outsourcing your customer engagement services can improve the prospects of retaining your customers and increasing your customer loyalty. FCS is equipped with an omnichannel customer service strategy that allows for seamless interaction across various touchpoints. This strategy, combined with our dedicated and professional team can foster customer retention and loyalty, propelling your business towards greater success.
First Credit Services: Pioneers in Accounts Receivable Management
First Credit Services, with over 30 years of industry experience, stands as a trusted partner for businesses seeking to optimize their accounts receivable management. Here’s why:
First Credit Services leverages state-of-the-art technology to streamline the ARM process, thereby ensuring efficiency and effectiveness.
According to a research study by Billtrust, more than 60% of businesses still haven’t transitioned the majority of their invoices or payments to digital formats, with nearly 30% of payments continuing to be processed through cash and paper checks.
With years of industry experience, the team at First Credit Services understands the nuances of collections and the best practices for managing receivables.
First Credit Services prides itself on maintaining full compliance with all collection laws and regulations.
To know more about our compliance regulation strategy, read: Value of Regulatory Compliance Strategy in Debt Collections
As businesses look to optimize their financial processes and boost collections, effective accounts receivable management stands as a key strategy. Outsourcing ARM to seasoned experts such as First Credit Services can lead to improved cash flow, reduced costs, and minimal risk, ensuring your business continues to thrive in a competitive market.