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Accounts Receivable Services Can Help Your Business to Get 47% Credit Sales Paid On-time
93% of businesses suffer from late payments of customers. Accounts receivable services can optimize the slow conversion of receivables into cash or working capital. While most businesses do have formal AR policies, poor execution contributes to the slow conversion. This is especially true for accounts receivable aging reports.
15 Industries Where Accounts Receivable Outsourcing Can Help
A survey found that a good portion of businesses across industries suffers from slow conversion of accounts receivable into cash or working capital. These are the following:
|
Industry |
% Paying Current | Up to 30 Days Late | 30-60 Days Late | 60-90 Days Late |
91+ Days Late |
|
Miscellaneous Publishing |
28% | 8% | 3% | 3% | 58% |
| Nonresidential Construction | 35% | 11% | 8% | 8% | 39% |
| Construction for General Contractors & Operative Builders | 35% | 11% | 8% | 7% | 38% |
| Passenger Car Rental | 43% | 15% | 8% | 5% | 30% |
| Retail Home and Auto Supplies | 52% | 3% | 14% | 9% | 23% |
| Wholesale Packaged Frozen Goods | 63% | 13% | 2% | 1% | 22% |
| Automotive Dealers and Gasoline Service Stations | 57% | 4% | 12% | 8% | 20% |
| Wholesale Medical and Hospital Equipment | 55% | 1% | 17% | 9% | 19% |
| Oil and Gas Extraction | 40% | 24% | 11% | 7% | 18% |
| Equipment Rental and Leasing | 46% | 13% | 13% | 11% | 17% |
| Manufacturing for Environmental Controls | 48% | 22% | 9% | 5% | 17% |
| Manufacturing for Hoist, Cranes, Monorails | 51% | 15% | 15% | 3% | 16% |
| Retail Furniture | 48% | 22% | 9% | 5% | 15% |
| Manufacturing for Sheet and Metal Work | 76% | 7% | 1% | 1% | 15% |
| Manufacturing for Signs/Advertising Specialties | 48% | 23% | 9% | 5% |
15% |
A weak accounts receivable policy is proven to hurt a business cash flow. It is a fact that for every late payment, companies write off 1.5% of their receivables as bad debt. Imagine the loss it can incur overtime if this is a normal scenario in your business ledger.
Reasons that Leads to Bad Debt of Accounts Receivables
Obviously, financial management is a core part of your business. However, problems arise when one of its complementary processes does not function well. In this case proper focus on accounts receivable policies.
These arise when you fail in the following:
- Establishment of a strict process to follow up on customers when payments are past due
- Gives sales representatives the freedom to override credit limits and end up incurring losses from bad credit risks
- Lack of appropriate training for staff on how to deal with late paying customers
- Insufficient attention to check and verify the accuracy of the bills, invoices, or credit terms
- Incorrect cash payments allocation resulting in failure to identify which payments are outstanding
You should take note of the failure to provide the necessary focus on AR policies. This can hurt your business in the long run. Without proper countermeasures, you may find your business in the slump not long from now.
Your financial department may seem working well on the surface. But little did you know, they may have swamped up to go after clients who have outstanding debt to your business.
Making follow ups and proper reporting is a tedious task for your local finance team. Another factor to consider is you have to establish the necessary protocols when you should send reminders to your clients to pay on time.
As well as the software and infrastructure to do all these tasks. Most of the time you simply do not have the resources to do so. This is where accounts receivable management services can help you.
How Accounts Receivable Outsourcing Can Help Your Cash Flow
Most of the businesses listed above can outsource receivable services to leading BPO companies in the Philippines. Tons of accounts receivable services providers offer end-to-end financial solutions.
For persisting late payments, accounts receivable aging report services are good to help augment RA conversion into working capital.
Your accounts receivable solutions provider can list each client’s outstanding balance. Depending on your requirements, they may send email follow-up or call your clients that went past due.
This is an efficient system to ensure your clients are reminded on time. Customer accounts reconciliation is also a good process to outsource. Here you can ensure that clients who pay on time are properly accounted for.
While clients that are often the cause of late payments are also recorded for your outsourced AR team to send follow up to.
All this financial information is uploaded in a database that you can access whenever, wherever. This is a secured database that also gives you a bird’s eye view of your AR such as past due for 30 days, 60 days, 90 days, or 120+ days.
You can also track the status of each client if your outsourced team duly sends the needed reminders. Through these timely updates, you can decide what is the next course of action for delinquent customers.
Process Involved in AR Services
SMEs and startups are in a good position to outsource these specific services. Here you can get the services that you need within a duration that you most need them. Your outsourced AR team can do the following to help augment your financial management.
1. Establishment of Credit Practices
These BPO companies have the best practices and experience to create these services. Depending on your requirements, they can create a credit application process that will suit your business.
Here you can add the necessary terms and conditions for credit deals that conforms to Federal laws using a loan. Prerequisites and commitments of the customer are properly defined for awareness in payment delinquency.
You can also use these documents in order to ensure you can go after customers who do not pay on time within the due indicated.
An established credit practice also helps your sales representatives whether they can adjust credit limits of the clients or not.
2. Invoicing and Billing For Customers
A receipt comprises data such as the expense of the item or service rendered. As well as details of the same, and the payment date. Each invoice has its own unique number. Customers may get their invoices through physical or electronic copies.
Business prefers soft copies as these are cost effective, convenient and for easy retrieval. Your outsourced AR team possesses the proper tools and staff to help streamline this specific process.
This way your local finance team can obtain proper information in a snap. This is also helpful for your tax time and audit processes. As information is in the same place.
Accounting Software Outsourced AR Team Commonly Use:
- QuickBooks
- Sage
- CheckMark
- MultiLedger
- MYOB
You don’t have to concern yourself with training as these virtual teams are adept at using these software. This assures you of efficient service delivery.
3. Monitor Account Receivable
Tracking of accounts receivable is often time consuming. Your AR specialist can scrutinize and verify a customer’s payment deposit, put it into the AR system, and allocate an invoice.
AR specialists can also reconcile the AR ledger to ensure each payment is properly accounted for. This information is then used to release monthly statements to your customers. Which also gives your customer’s information on the remaining balance.
Timely issuance of customer monthly statements gives your client the impression that you are on top of everything. It also provides them with relevant information such as due dates. This way they are not bombarded with reminders and can strategically pay you before due dates.
For your overall accounting processes, a properly reconciled AR ledger is important to keep your books balanced. This way, your local finance team can identify which needs improvement when it comes to accounting.
It also gives you the ability to identify which part of your accounting processes is ineffective and needs improvements. For your business projection, you can get an accurate overview of your financial status.
Imagine a healthy working capital that you can invest to enhance your products or services.
When Should You Outsource Receivable Services
Outsourcing financial-related matters may be intimidating for some. Imagine the information you have to provide to these offshore companies.
However, outsourcing your AR aging reporting and customer accounts reconciliation to experts is far advantageous to pass up.
If you are suffering from writing off receivables as bad debts and a good portion of your credit sales are paid late, maybe it is time to outsource your AR processes.
What Should You Look For Accounts Receivable Management Services Provider
There are various reasons why outsourcing AR services is a good business strategy for you. These are the following:
Secured Processes
Security breach is one of the main reasons why businesses veer away from outsourcing. However, you should recognize that the BPO global market is a thriving business. That is why strict protocols with regards to ISMS is a common sight in this market.
Outsourcing companies are adept at securely accessing, storing and legally complying with the confidential information breach. ISO 27001 or the ISMS is an integral part for these BPO companies.
Thus you are assured they can protect your data at all times. They also invest in training, firewalls, monitoring, encryption, and physical security like proximity cards. These protocols are in place to ensure your data and information remains safe.
Solves More Problems
Outsourcing can offer the necessary support and scalability for your financial matters. Choosing the right partner is a virtual extension of your local finance team. Here, they can work from an in-house system that provides real-time updates.
They can work simultaneously with your in-house team. This diminishes the disconnect as they are accessing the same database and works on the same information.
Your in-house team can now focus on the more complex and analytical side of your financial department. While your outsourced AR specialists work on tedious processes at a faster turnaround time.
An Ally For Your Business
A good outsourcing partner can work on your policies and business framework. This is a collaborator that you share the goals with. Achieve a healthy cash flow.
They can work within your structure such as payment methods, security standards, payment timelines and the process for overdue accounts. Or they can create processes that will suit your needs that your in-house finance team can work with.
Always remember that in outsourcing, you have the final say.
Magellan Solutions Can Provide Your Needed Accounts Receivable Solutions
Our 18 years of industry experience provides us the necessary wisdom and technology to deliver the best accounts receivable services. We focus our solutions to SMEs who wants to streamline their AR processes.
Here are Magellan Solutions, our business development managers can customize your needed AR solutions for your healthy cash flow.
Our staff possess the right amount of accounting and financial management experience. As well as the educational background to understand your pain points in order to solve them efficiently.
They are also adept at using the latest and innovative accounting software to ensure their services are at top speed.
Data and information security is also our top priority. We are ISO 27001-certified, GDPR, and HIPAA-compliant. This is our pledge to assure you that we are a legitimate ally for your business.
Contact us today and let us create the fitting accounts receivable solutions for your business. Fill up the form below!
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