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Nine Earmarks of the "Right" A/R Outsourcing Partner

Originally published: August 2010


Are you ready to make outsourcing a part of your ARM process? An increasing number of credit professionals already have. They're finding this strategy effective in taking control of their receivables and handling the challenges of managing DSO, cash flow and write-offs.

One solution worth considering is outsourcing the collection of at least a portion of your accounts receivable portfolio.

But once you've made the decision to outsource, how do you select a provider that's right for you? After all, you'll be entrusting them with your most valuable asset, your customers.

How do you find a provider that's a good fit with your particular needs and management style? One you can have confidence in to look after your interests? What does the “right” first-party collections outsourcing firm look like?

Listed below are nine qualities and capabilities that describe the best first-party collections outsourcing providers.

What the Right First-Party Collections Outsourcing Provider Should Be

#1 A/R specialists – This needs to be first and foremost. Large service and sales call centers like to think they can effectively manage late pay accounts. But they're generally unsuccessful. Effectively handling past due accounts is a specific skill requiring on-going training and experienced management. A reputable, receivable management firm with a well-trained, well-managed and experienced first party outsourcing department should always be your first choice.

#2 Compatible with your corporate culture. Both you and your provider should share the same views as to what is important. The way you handle your customers should be mirrored in the way they handle your customers. Outsourcing, when it works, is a partnership. You must be confident that you and your provider can work together to achieve maximum benefit.

#3 Capable of meeting your requirements. This seems obvious, but some providers may try to shoehorn you into their pre-set program. You need to stay in control. The right provider will be flexible enough to meet your specific needs.

For instance, if all you need is a short-term, clean-up project, some providers gladly handle smaller projects without requiring extensive contracts. If you have international accounts, there are firms that have bilingual collectors and specialize in first party collections abroad.

If you have never outsourced your accounts receivable before and are not sure what to expect, find a firm that will do a two to three-month test project. You will be able to test the waters and determine reasonable expectations going forward.

Find an outsourcing partner that’s willing, and able, to work within your comfort zone.

#4 Committed to best in class processes and systems. If they can’t do it better and faster than you can, why bother? Don't look at costs alone when selecting a provider. Dozens of studies have shown that cost savings, by itself, isn’t enough to justify outsourcing your accounts receivable. However, the time saved, detailed reporting, effectiveness, consistency and professionalism that you can get from a really top-flight provider following proven techniques and working in a state-of-the-art system can be huge.

Outsourcing isn’t just about throwing more bodies at the problem. It’s about giving you a cost-effective means of staying on the cutting edge.

What the Right A/R Outsourcing Provider Should Do

#5 Customize their program to meet your requirements. A good provider will work with you to help define your needs and develop reasonable expectations. Based on this information, they will then develop a customer treatment plan to achieve your goals.

#6 Provide a program based on sound business rules, following proven techniques for account management.

#7 Assign a dedicated team of representatives,
thoroughly trained in recovery techniques, dispute resolution and customer service. The provider will then train these reps in your systems and continue to monitor their effort to ensure your expectations are being met.

#8 Give you access to state-of-the-art receivable management technology. The management tool used by the provider should allow associates to track all activities and customer promises to assure consistent and timely follow-up. You should have the ability to view real-time activity on each account and communicate directly with the associates.

#9 Provide reporting that is transparent, meaningful, and insightful. Your entire portfolio should be accessible via one database, preferably through an Internet interface. Statistical reports should be available and customizable.

Benefits of Partnering With the Right Provider

To survive in today's business climate, cost-effective, efficient receivable management is critical. Not only are resources tight and the competition fierce, the economy has added a new level of challenges. Now consider this, just a $500.00 loss, at a 5% net profit rate, costs $10,000 in sales!

Outsourcing all or part of your accounts receivable management process to the right provider should help by:
  • improving your customer relationships while training them to pay within your terms.
  • giving you the ability to right-size staff, ensuring qualified coverage for special projects, vacations, seasonal business upswings, etc.
  • lowering your DSO, decreasing write-offs, increasing cash flow, and improving the overall health of your company.