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Outsourcing debt collection services provides companies a viable alternative to the challenges of collecting past due receivables from their customers.

Outsourcing Debt Collection Services - 6 Business Benefits

Outsourcing debt collection services provides companies a viable alternative to the challenges of collecting past due receivables from their customers. Basically a company outsources their debt collections to improve efficiency, cash flow, and profitability while reducing costs and financial risk.

Depending upon your company profile, you may find that outsourcing debt collection services is a financially better solution than trying to manage it with your internal resources. So, let’s discuss the benefits and related factors you should consider before moving forward.

Outsourcing Debt Collection Services Infographic

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Outsourcing Debt Collection Services Overview

Total U.S. consumer debt has risen to more than $14 trillion in the first quarter of 2019 surpassing the previous high of 2008 when global financial markets went into a tailspin. This consumer debt is accumulated in credit cards, auto loans, mortgages with a notable increase in student loans. Because of this ballooning debt, it places businesses increasingly at financial risk managing their account receivables (AR).

For a variety of reasons customers payments get delayed or stop. Furthermore, many businesses do not have the time to consistently follow up, until it’s too late.. Also debt collection efforts is normally not the core business and distracts and wastes time and money.

Outsourcing debt collection services can help enhance your business efficiency and reduce your risk of financial lost. Overall, your business can reduce the risk of non-payments from customers that are on the verge of going into default.

Listed below are six benefits your company can gain if you decide that outsourcing debt collection services is the solution for your particular situation.

1 – Increase Efficiency

Outsourcing debt collection services to a third-party reduces the time and resources your company needs to collect past due receivables. Because this is the third-party provider core business function, collecting receivables is a consistent, timely and efficient process. So your company gets to focus on it core business.

The debt collection outsourcing provider excels at this because it operates as a commercial debt recovery machine.  Conversely, your business does not.

Debt collections is detailed, sensitive and stressful work. Not surprisingly, your company’s in-house personnel often struggle balancing the collection activities with their other job priorities. Consequently, by outsourcing debt collection services, you to free up your company personnel and resources. So you get to focus on other activities that will increase your company’s productivity and revenue.

Your company portfolio of late or non-payments receivables are reduced as your outsourcing debt collection provider dedicates their resources. Specifically their personnel, technology and expertise to monitor and collect payments on your receivables.  Also, a debt collection provider must produce positive results to maintain your company’s business relationship.

Debt Collection Efficiency

2 – Improve Cash Flow

Often a company struggles with their cash flow management.   Accordingly, when it is difficult to collect past due receivable payments, it has a very negative effect on your business.  Because your company is denied the cash flow it needs to operate.

Outsourcing debt collection services helps your company reduce or eliminate cash flow “gaps” that are key to cash flow management.  While a variety of components affect this (credit terms, policy, inventory and accounts payable), the key one is accounts receivables.

Accounts Receivables

If your company offers credit terms, then your accounts receivable payments are likely the most important source of cash inflows.  Therefore your company needs to prioritize this.

Unfortunately an internal staff has difficulty staying in touch with it’s customers regarding their payments. Because collecting on your company’s AR is often overlooked or pushed aside for other business activities.

Outsourcing debt collection services to oversee your AP processing helps your company regulate your company’s cash flow.  Moreover, your customer defaults are significantly reduced by maintaining strict monitoring of your receivables and Credit Terms.

Cash Flow

3 – Reduce Debt Collection Time

Outsourcing debt collection services provides experienced personnel who are comfortable making collection calls to your customers about the debts that they owe your company. Specifically they are knowledgeable about the rules and regulations that govern debt recovery as well as having the systems and infrastructure to streamline the process.

This results in  reducing the average time spent on per-account collections activities and a higher success rate of customer payment. Consequently this increases the number of past due receivables collected, while reducing the Debt Sales Outstanding (DSO) and increasing your company’s cash flow.

For companies with high sales seasonality, using outsourcing debt collection services can also supplement your in-house collection personnel, helping maintain your DSO and company liquidity.  Basically less stress for you and your collection personnel.

Debt Collection - Time

4 – Lower Collection Costs

Companies often invest in an in-house collection strategy due to the desire to directly manage customer accounts and business relations.  Also, there is the perceived savings in cost rather than using an external provider. However, an internal debt collection strategy comes with the price of investing valuable time, capital, human resources and emotional energy.

The cost of performing collection tasks in-house is often far more than outsourcing debt collection services.  Particularly when you consider the cost of hiring, training, and paying employees to perform debt collection,

A third-party debt collection provider has the systems and technology that small companies often can not afford.  Consequently this allows them to administer your company’s accounts receivables using analytics to prioritize their collection personnel to bring in the highest volume of revenue in the shortest amount of time.

DISCLOSURE: Nexus Teleservices is a Nearshore Debt Collection Services business provider.

Debt Collection Efficiency

5 – Client Relations

All client relationships are important and need to be nurtured. Meanwhile, outsourcing commercial debt services allows your company to maintain a positive, professional relationship with your delinquent customers while they administer the direct communication of collections activities.

It goes without saying that contacting customers late on their payments takes an emotional toll on business professionals. Obviously reminding your customers that they owe you money, is never an enjoyable conversation. However, avoiding or delaying contact is not a viable option to reduce your accounts receivable.

Contacting delinquent customers as soon as possible in the collection cycle will result in a better recovery rate of at-risk accounts and result in a better return on investment.

Client Relations

6 – Debt Collection Policy

Your company needs to communicate with your customers (business or consumer) the importance it places on consistent, on-time payment of invoices.  Otherwise, failing to formalize your company’s debt collection policy, and consistently adhering to it, will result in hurting your debt collection efforts.

When your company is not consistent in its debt collection policy, your clients will not take you seriously when it comes time to prioritize paying invoices. Basically this is one of the primary reasons for customers not paying on time or not paying at all.

When your customers understand that your company is serious with it’s payment terms and conditions, they are much more likely to pay your invoices on time.  Particularly if your company’s debt collection policy states that past due accounts are automatically sent to a debt collection agency.

Obviously this requires that your company use outsourcing debt collection services to implement your debt collection policy.  Accordingly your debt collection policy needs to state clearly your company’s payment terms and conditions in sales contracts and invoices.

Debt Collection Policy

Outsourcing Debt Collection Services Conclusion

Outsourcing debt collection services helps companies improve cash flow by reducing customer bad debt. Also, they strengthen client relations, lower collections costs, reduce the waste of internal company resources, and the time and distractions related to collection activities.

Please call us at (888) 339-6699 to discuss how our call center debt collection services will serve your business needs or Contact Us.

Comments (2)

Thanks for the concise overview of how a business can benefit by using debt collection services. With the economy so difficult it is easy to understand how a business needs to spend more resources managing their late paying customers.

Outsourcing your debt collection to the professional would surely alleviate tons of stress to the AR, admin or whoever has the uncountable task of calling someone so they can get paid.

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