Companies that do not receive payments on time can suffer from anemic cash flow, which makes strategic planning, forecasting, and overall business growth all the more difficult.
The bottom line is accounts receivable needs to get paid faster and more efficiently.
To improve your organization’s AR processes, you’d need a hefty investment—in new technology, new employees, new tools—and most companies aren’t willing to spend and risk that much, especially considering the current state of the global economy.
AR providers come fully equipped with the tools, skills, and technology not only to manage your existing AR workflow and functions but also to integrate and provide new capabilities that give you a more streamlined and efficient process.
And when it comes to selecting the right outsourcing partner, you want one that is aligned with your AR goals, be it reducing day sales outstanding (DSO) and securing payments on time.
Benefits of a Successful AR Outsourcing Partnership
One of the main advantages of AR outsourcing is the significant potential cost savings you could bring to the company. When you outsource, you avoid fixed overhead expenses such as hiring and training new employees, which can be costly to the company. Not to mention the on-boarding of new technology and facilities would also cost an arm and a leg. In times of economic uncertainty, these savings could be crucial to your organization.
More resources without adding headcount
Outsourced AR providers give you access to more resources than you had before without the need to increase headcount in your organization or demand resources from other departments in your organization. Providers already have all the support they need to optimize your AR process with tools like automated invoicing and billing platforms. For example, the Corcentric Order-to-Cash offering would bring your organization’s AR’s IT requirement down to zero.
Easily integrate your various business systems
Many organizations often struggle to break down the silos between business units and integrate different business systems, preventing cash flow visibility and process efficiency. The best in class AR outsourcing firms would have the tools to integrate with your system seamlessly. Corcentric uses a cloud-based solution that removes the barriers to integration.
Fewer AR errors
Companies that don’t have the right technology and tools are often prone to errors as their AR processes still rely on paper and manual data entry. Conversely, AR outsourcing firms know the best practices and have the latest automation tools and technology that can identify errors before they become a liability.
Access to Innovative Technology
In high-performing business-process outsourcing relationships, there is an incentive for service providers to innovate and introduce new technology to improve their solutions continuously. As a result, companies gain access to these innovations and directly benefit from it.
Immediate DSO Reduction
Unlike traditional Order-to-Cash SaaS technology solutions, which can take up to 6 months to see up to 2 days DSO reduction, outsourcing your AR will immediately reduce DSO potentially in as early as 15 days! And depending on what terms you have negotiated with your outsourcing provider, this can be an immediate reduction of 10, 20, 30+ days of DSO.
What is one day of DSO worth to you?
Reducing DSO frees up time, investment capital and resources that can be reallocated towards core business functions focusing on growing the business. Companies with lower DSO have more cash flow at their disposal…what would you do with 1,3, 15+ days of DSO reduction?
That said, outsourcing AR is not without its risks…
Cons of AR Outsourcing
Handing over control to a third party
Giving away the keys to the house is never easy. More so, when it directly involves the cash flow of the company. While the risk of a security breach is there, usually the premium AR providers have controls in place to prevent such a thing from happening. On top of that, the law is also there to protect you.
In an age where data is considered the new oil and data theft is rife, the concerns over privacy are legitimate. However, solutions provided by companies like Corcentric have features that automate importing and exporting of files but prevents them from having full access to your accounting system.
AR Outsourcing: The Pragmatic Choice
When most companies are making the tough decisions to cut costs, opting to outsource AR seems like an easy one to make. A successful partnership brings you savings, improves your cash flow as well as increase your working capital—and with AR out of the way, your company can fully utilize its resources to focus on what it’s good at.
Corcentric offers an Order-to-Cash solution that guarantees DSO reduction and payments, innovative centralized billing technology, managed services, and expert knowledge into one offering to streamline transactions for suppliers and customers. Our solutions reduce the complexity of transaction management between suppliers and business partners. The results enable organizations to improve cash flow, achieve operational efficiency, and deliver customer satisfaction.