A Comprehensive Guide on Accounts Receivable Outsourcing
Introduction to Account Receivable Outsourcing
Account receivable is the opposite of accounts payable, meaning without Account Receivable, your clients cannot think of running a successful business. No matter if your clients have produced the best-branded product and sold numerous units of it if they are not getting paid, they will not survive. However, if your client owes payment to suppliers for the goods and services purchased, then it constitutes an account payable.
However, it is essential to realise that accounts receivable processes are becoming more complicated in the United Kingdom. As noted, bookkeeping is about more than manually looking after books anymore. Reasons include influences of new technologies and new rules and regulations from the HMRC. All this has made managing accounts receivable of your clients and for accounting practices like yours difficult. However, there are many options to manage this issue such as process automation, AI driven analytics, and so on but none has been as popular as account receivable outsourcing.
Explaining the Concept of Accounts Receivable
In simpler terms, understanding accounts receivable means that your clients owe you money for the goods and services they purchased. Accounts receivable represent money considered as a current asset, providing clarity on your client’s financial status. In accrual accounting, we show accounts receivable as the value of our clients, even though our clients have not yet received the money.
In other words, when both parties strictly adhere to the terms of the transaction, they convert accounts receivable into bankable cash. Any delay on the side of your client’s customers to make payments will deteriorate the value of your client’s accounts receivable. To avoid such a situation and overburden, accounting practices like yours can choose to accounts receivable outsourcing to a service provider.
The Importance of Managing Accounts Receivable Outsourcing
By choosing accounts receivable outsourcing for your clients you are actually opening the floodgates of multiple benefits for yourself and for your clients. But before that you will have to take into consideration certain factors else you may not ably offer the full benefits and will lead to loss of reputation in front of your clients.
Before going for outsourcing, make a proper analysis of your client’s business cycle, the cycle timing, customer locations, and total sales. Also, consider the risk you will be taking and the supply chain with vendors. It is important to deliberate with your client’s vendor before deciding to outsource.
The Benefits of Account Receivable Outsourcing
Lowering of Costs
One of the main aims of account receivable outsourcing is to increase cost savings. You and your clients will be experts in your core tasks in the same way service providers will be experts in providing account receivable outsourcing services. By transferring the responsibilities to a service provider for account receivable function, you and your clients will not have to invest in staff to look after it, thus saving money.
Technology Efficiency
Your clients will surely have extensive knowledge about their business; similarly, account receivable service providers have invested significantly in the latest technologies related to receivable tasks. The reason behind the investment is to overcome the challenges that come with sharing financial data between systems and platforms. Any professional service provider will invest in the integration and reporting platforms to gather and share all the information.
Therefore, this benefit can be enjoyed if you select a service provider that offers it, thus giving you real-time status of your client’s financial status. Through it, you are empowering your clients to make informed and critical decisions.
Improved Flexibility
Your client’s sale cycle will not be the same throughout the year; there will be seasonal peaks or a bunch of deals that might be closed at the end of the financial year. To handle this extra account receivable workload, you must maintain different levels of workforce at different times of the year.
But if handling it internally is becoming an issue, then you can outsource it to a service provider thus reducing the need for increasing your staff levels, especially during peak times. Recruiting new staff will require investment in their training and learning will require time. Therefore, you can outsource work without hiring and incurring employee costs during a sudden spurt in work.
Concentrate on Your Core Activities
If account receivables are a non-core task for you, it is better to outsource them to an account receivable service provider. This will enable your internal staff to concentrate on core responsibilities.
Increased Accuracy
Your account receivable processes must have undergone significant changes, such as reduced manual work and increased technology use. Still, there will be significant manual intervention, which will increase the chances of human error. Even if you have invested in the latest technologies, your staff, especially the new recruits, will need more knowledge and experience to work with them. Instead, if you choose to outsource your client’s account receivables to a service provider that already uses the latest software, there will be fewer bookkeeping mistakes.
Conclusion
To sum it up, the aim of this blog is to make accounting practices like yours understand that when your client’s sale cycle peaks, there will be a sudden spurt in accounts receivable outsourcing, making it difficult for you to manage alone. Therefore, it is wise to consider the option of account receivable outsourcing through a service provider. Many professional service providers offer you, their services; among them is the highly capable and experienced Corient Business Solutions.
We specialise in offering tailored accounting services for accounting practices. Our teams have vast experience in multiple payroll applications, such as Sage, Brightpay, Xero, Moneysoft, Earnie, and Star Payroll. Our year-end, VAT, payroll, and bookkeeping outsourcing services are designed to give your practice an edge in the market, thus saving you time to invest in other important tasks. We can connect at your convenience by phone or online meeting to discuss our services in detail.