Why is accounts receivable management essential for your business?

Managing accounts receivable is an essential element of the financial health of a company. This article first explores all the constituent elements of receivables and the often underestimated crucial importance of optimizing its management to guarantee the stability, growth and sustainability of a company. Then, we will exhaustively study all the benefits that outsourcing customer account management can provide. Finally, we will provide key elements for choosing the solution best suited to your environment and your organization. Plot ? Explore with us the keys to optimal management of late payments and unpaid invoices.

What is a company’s receivables?

A company’s accounts receivable represents all of the invoices issued to its customers. Whatever the category of the company, VSE, SME, ETI or Large Group, the management of accounts receivable is a strategic operation which directly impacts its sustainability over time.

The receivables item is made up of the following elements:

1. Unpaid receivables or invoices : these are the amounts owed by customers to the company in exchange for goods sold or services rendered. These receivables may arise from credit sales or transactions for which payment has not yet been made.
2. Debit balances : Debit balances represent negative amounts on customer accounts, typically due to refunds, merchandise returns, or billing adjustments.
3. Deposits and advances: Some businesses require deposits or advances before providing goods or services to their customers. These amounts are also included in receivables until the goods or services are delivered or rendered.
4. Doubtful or unrecoverable debts: it may happen that certain debts become doubtful or unrecoverable due to the customer’s inability to pay. These amounts must be evaluated and possibly provisioned to reflect their doubtful nature in the company’s financial statements.
5. Provisions for depreciation of debts: companies can set aside provisions to anticipate potential losses linked to doubtful or unrecoverable debts. These provisions reduce the carrying value of the receivables and reflect the risk associated with recovery.

In summary, a company’s accounts receivable includes all commercial transactions awaiting payment from customers. It represents an important element of the company’s financial cycle and requires effective management to increase cash flow and reduce the risk of non-payment, from the negotiation of payment terms to the collection of invoices.

To optimize their receivables, many companies choose to outsource its management, in whole or in part, in particular to a collection agency .

The benefits of outsourcing accounts receivable management

Outsourcing the management of accounts receivable , that is to say entrusting the management of customer receivables to a third-party company specialized in this area, presents several advantages for a company:

Let’s list the benefits:

1. Obtain better performance in recovering your unpaid debts: amicable collection methods from external service providers are often more effective than internal procedures. They are professionals trained specifically to handle debt collection challenges. Their expertise includes, among other things, knowledge of collection laws and regulations. They therefore activate the right levers more quickly to make debtors want to pay.
2. Stay focused on your core business : by outsourcing all or part of debt collection , the company can focus more on its core activities, which can improve its operational efficiency and competitiveness.
3. Optimize costs : Outsourcing the management of accounts receivable can reduce costs linked to recruitment, training and HR management of personnel responsible for following up with debtor customers. Companies can also save on costs related to the implementation of specific technologies and various legal recovery procedures.
4. Benefit from certain flexibility : The company can quickly adapt to the flow of unpaid debts without having to adjust its internal structure. This can be particularly beneficial in industries where workload is seasonal.
5. Improve the quality of customer relations : By using experts, the company can benefit from a better quality of service for its customers, which can result in increased customer satisfaction.
6. Benefit from the latest technologies: External service providers often invest in the latest technologies to remain competitive. By outsourcing, a company can take advantage of these technologies without having to directly incur the associated costs.
7. Bear less risk: External service providers can share the responsibility and risks linked to your receivables. This allows your company to focus on more strategic aspects of its business.

Outsourcing of accounts receivable management: a solution for what size business?

If VSEs (Very Small Enterprises) and SMEs (Small and Medium Enterprises), which are particularly flexible, are more open to outsourcing some of their activities, due to lack of internal resources for example, large accounts can also find a interest in outsourcing, as a complementary service to internal actions or in the case of “one-shot” operations carried out to improve financial ratios.

In summary, although debt recovery outsourcing is more common among VSEs and SMEs, it is not exclusively reserved for these companies. It depends on the specific needs of each company, its internal resources and its financial strategy.

As you have understood, optimizing accounts receivable management presents challenges and opportunities that can be better understood through outsourcing.

By entrusting the management of its customer debts to a collection company such as GESTION CREDIT EXPERT, companies can benefit from in-depth expertise, effective amicable negotiation methods, and a certain flexibility.

In addition, this strategy makes it possible to free up internal resources, reduce operational costs, improve the quality of customer relations and benefit from the latest technological advances.