Differences Between In-House & Outsourced Accounts Receivable Management

Regardless of their size, many businesses still rely on traditional accounts receivable services that are managed and completed manually by in-house staff. But this can be a tedious, time-consuming process, with human errors costing you a lot in the long run.

These businesses, which may be held back by traditional systems, should consider outsourcing their accounts receivable management. Along with increasing efficiency and eliminating errors, it reduces the overhead associated with in-house staffing.

Keep reading to understand the differences between in-house and outsourced accounts receivable management, and to make the right choice for your business.

In-House vs. Outsourced Accounts Receivable for Business: Which Should You Choose?

To aid in the success of your business, it is necessary to understand the differences between in-house and outsourced accounts receivable management.

In-House Accounts Receivable

An in-house accounts receivable management process requires a team, working together to complete specialized accounting-related tasks. However, there are numerous challenges associated with this process. These include:

1. Risk of Human Error

Manual processes like accounts receivable management are likely to produce costly errors which directly impact your business’s cash flow. For instance, if you apply for payment on the wrong invoice or enter incorrect information, you may experience financial loss if someone fails to collect outstanding invoices.

While you may think that these processes can be tracked and corrected, over time they can reduce your cash on hand while you wait for potential errors to be rectified.

2. Difficult to Scale

As businesses grow, their accounts receivable processes scale up too. Manual processes are best-suited to companies with a low number of monthly invoices. However, the accounts receivable management process can become overwhelming to handle manually as your business grows. It will take more time and resources to complete, which may lead to reduced cash potential and a poor customer experience.

3. Takes Time

Manually managing a company’s accounts receivable processes can be time-consuming. This is because the invoices need to be manually generated and sent to customers. Then the payments have to be collected, verified, and reconciled. Moreover, your in-house staff must be well aware of all of the outstanding accounts to send payments and begin collections.

Outsourced Accounts Receivable

When a company chooses to outsource the management of its accounts receivable process, they have a third party providing the right skills and expertise. Such third parties also often simplify your invoicing, billing, and payment processes. These benefits include.

1. Lower Employee Costs

An outsourced accounts receivable company takes care of your business’s processes to eliminate the need for an in-house team. So, over time, you will have lower overhead while benefiting from improved cash flow.

And it is easy to scale up the accounts receivable management process as your business grows. With a third-party provider, you won’t have to worry about recruiting or training additional staff members to keep up with your business.

2. Easy Follow-Up

One of the most important but difficult accounts receivable tasks is following up with clients regarding payment. It requires continual attention, resources, and time. Third-party providers have experts who know how to use the latest technology and software to provide the best possible results. And they follow up with clients for payments at the right time.

3. Fresh Perspective

Most in-house teams have to be trained to understand how the company works and to ensure they can complete tasks assigned to them effectively. Outsourcing your accounts receivable process enables your business to gain a new perspective on their project and receive feedback they may not have received otherwise. This allows you to adjust your business based on what your customers require. A great example of this is the digitalization trend sparked by the COVID-19 pandemic. The trend forced many in-person service providers to adapt to easy-to-use technology to keep up with a changing industry where people prefer making transactions online.

Managing your accounts receivable can be time-consuming and complex, especially for growing companies. As you can see, both in-house and outsourced accounts receivable management can help businesses undertake and complete projects of various sizes. However, it comes down to your unique needs to determine which will be the most cost-effective and efficient option for your business. Your best bet is to find a third-party provider that understands your industry. With an outsourced accounts receivable company, you can rest assured knowing they will be with you and ensure that customer interactions are positive.