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In-house vs. Outsourced Accounts Receivable: Why Smart Businesses Choose AR Outsourcing

09-Jul-2024 . 6 min read

Before we dive into the in-house vs. outsourced accounts receivable debate, let’s look at some concerning B2B collections trends from across the globe:  

  • 55% of all B2B invoiced sales in the United States are past due, states a report.  
  • Western European companies are struggling with insufficient working capital, long DSO, and rising bad debts, as per research.  
  • 60% of businesses in Asia Pacific experience late payments, another survey finds out.   

Yes, accounts receivable (AR) are quite a challenge if you are a business owner! However, you can’t simply watch your cash pipeline dry up and take loans to fund your working capital needs.  

Going from creditor to debtor all of a sudden—it’s hard, right? 

So, you must step up your efforts and find ways to improve your trade credit collections to ensure healthy cash flow and liquidity! And this now brings us to our key point of discussion: should you keep your AR function in-house or outsource it? 

Top Challenges Accounts Receivable Department(s) Face Today  

The accounting landscape is constantly shifting, compelling businesses and CFOs to adapt by overhauling existing systems or adopting new ones. However, accounting departments, including AR teams, may encounter numerous hurdles when navigating these changes. For instance:   

  • Cost Pressures and Talent Shortages: On one hand, businesses are trying to control operational costs, which can sometimes lead to layoffs. However, this as well creates a dilemma as there are already shortages of qualified accounting talent, making retention crucial. 
  • Upskilling Needs: Continuous advancements in accounting software and technologies require ongoing investment in upskilling the existing workforce. It’s not exactly cheap. 
Outsourced AR Accountant Working on His Computer

International Accounting: A growing number of companies are pursuing international expansion. The ease of e-commerce is also motivating many brands/businesses to enter new markets.

This, however, also necessitates setting up cross-border trade credit and payment collection processes, requiring expertise in international accounting standards (IAS) and IFRS practices.  

Overall, these factors are making it difficult for accounting teams and businesses across sectors, sparking discussions about the merits of in-house vs. outsourced accounts receivable.

Key Issues of Managing Accounts Receivable In-House 

There are several reasons why your in-house accounting team might struggle with managing accounts receivable (AR) effectively! Also, while talent shortages, hiring and retention problems, skill gaps and escalating operational costs steal the limelight, there are some that often go unnoticed, much like needles in a haystack.  

Here are some less talked-about but equally important issues

1. Workload Pressure 

Accounting tasks can quickly become overwhelming when your company experiences a surge in sales or customer base. Brace yourself for backlogs, errors, and slow collections if your in-house accounting team cannot handle it all! 

One may argue that pre-planning can mitigate these challenges, but rapid scalability is a tough nut to crack for many businesses, you will agree. 

2. Compliance Burdens 

Accounting regulations and tax laws are constantly evolving. Your internal team might get bogged down with ensuring the company is compliant with the latest reporting requirements.

Consequently, they would find themselves scrambling to deliver on other crucial AR tasks, such as customer onboarding, billing and invoicing, or chasing payments. 

Business Owners Happy to Outsource AR

3. Extra/Unrelated Tasks 

In some smaller companies, people need to wear different hats. The accounts receivable team might also be responsible for certain inventory management tasks, such as reconciling inventory levels.  

But please note that these tasks are not core AR functions. And handling both can add to the workload and distractions. A sure-shot recipe for delays and errors!  

4. Ad-hoc Requests  

Accounting teams often get pulled in different directions to answer questions from other departments, help with budgeting or forecasting, or investigate financial discrepancies. Sudden requests like these can quickly consume the time allocated for core AR and other accounting processes.  

5. Stuck in a Loop 

Sometimes, management fails to overlook the need to change and overhaul existing accounting systems/processes. However, it can also be the individual employees unable to break their patterns and behaviors—and they struggle to evolve and adapt.  

In either case, your accounts receivable process and collections suffer!! 

Beyond In-House AR: How Outsourcing Accounts Receivable Can Help  

Outsourcing your accounts receivable can help your business address the limitations of your self-managed AR processes.  

Because you get:

1. Trained AR Specialists: Cost-Effective Outsourcing vs. In-House Team 

You should hire only suitably skilled individuals. Poor skills and inadequate training lead to errors and rework. Additionally, adding more staff results in increased business expenses and time-consuming ongoing training.

However, AR providers already have the infrastructure and a large supply of well-trained accountants working for them.  

2. Dedicated AR Services, Not Overloaded Internal Team

In-house staff often juggle multiple tasks. As such, competing priorities and a lack of dedicated focus can lead to inefficient collections and aging accounts receivables. But the outsourced AR team’s focus is solely on assigned tasks, ensuring dedicated attention. 

3. Software Expertise: Stay On Top with Outsourced AR 

Outsourced AR service providers cannot but stay on top of advanced AR software, tools and related technologies.  This is a crucial requirement for their business and competitive edge.  

Graphic: Benefits of Outsourcing AR Function with Centelli

Want to simplify and streamline your invoicing and receivables management for healthier cash flows? At Centelli, we offer cost-effective AR management services tailored to your business needs and budget. We cater to businesses of all sizes and scales! 

4. Seamless Integration with Client’s Internal AR Systems 

Many accounting/AR service companies offer integration with popular accounting and CRM platforms. They ensure smooth integration, enabling seamless data exchange that provides businesses with a comprehensive view of their customer accounts. 

5. Outsourced AR for In-Depth Reporting

Professional AR accountant services implement best practices. They can also provide in-depth and timely aging AR reports regarding customer aging, customer payment history, days sales outstanding (DSO), etc.

This allows businesses to track AR performance and set up credit limits more effectively.   

6. Streamlined Compliance: Outsource vs. In-House AR  

Standard AR processes, backed by proper data organization, reconciliations, and timely updates, ensure easy access, accuracy, and tracking. Diligent and professional AR service firms, therefore, help boost compliance.

This helps businesses reduce compliance risks and prevent financial fraud and tax filing issues. Audits become easier, too.

In-house vs. Outsourced Accounts Receivable—The Final Showdown  

Beyond the above listed benefits, outsourcing your AR to an expert service partner offers these further advantages: 

a. Seamless AR Workflows via Outsourcing: Select the tasks you think should be best left to an outsourced team. Your service provider assigns a dedicated AR personnel who meticulously handles your data entry, invoice processing and tracking process, ensuring seamless workflow.

No competing priorities, high accuracy, efficient tracking mean faster collections!     

b. Massive Cost Savings on AR Operations In-House: Outsourcing can be more cost-effective than hiring and training in-house staff, especially for smaller companies. Interestingly, many deep-pocketed firms prefer external accounting outsourcing services. (Did you know you can save 35-60% costs when you partner with Centelli.)   

c. Quicker Scalability than Internal AR: Choose an accounting service that can easily align with your changing invoicing volumes. Scaling up or down as needed saves you from unwanted disruptions and expenses.  (Outsource your accounting/AR process to us and enjoy effortless scalability.)  

Contact Us to book a free consultation today! Also check out this case study 

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