A lot of people wonder why accounts receivables qualify as assets. Here’s a primer:
Accounts receivable is any amount of money that customers owe you. When you deliver goods or services to customers, the transaction is recorded as accounts receivable in your books—whether or not you receive the payment immediately.
Irrespective of when the payment is made, the money is yours and you have a legal right to categorize it as a current asset.
Here’s why we recommend outsourcing this essential business function:
Reduces administrative burden and costs
Accounts receivable is tricky to deal with since it is subject to its own accounting standards. There is thus a chance that an accountant whose expertise is in tax consultancy, filing or payroll processing wouldn’t be able to deal with accounts receivable in the most effective way.
In this case, you’d have to recruit, hire, and train expert accounts receivable professionals to do the job. This will add to your administrative overheads on multiple fronts.
In the case of outsourcing, you no longer need an accounts receivable department. Since there’s no team on board, there’ll be no need to invest in office supplies and equipment. Those funds can then be used to improve your relationship with customers.
Gives you control over the business
If accounts receivable isn’t handled well, the number of cents you receive per every dollar owed decreases. As delinquency increases, this number further decreases. This is because the time value of money also decreases over time. Any money you own has better valuation today since you can invest it and make profits.
As a business owner, you probably don’t have the time to chase defaulters. It’s just not your job. When you outsource the task, it’ll be the agency’s job to handle payments and update the company’s books accordingly. This gives you better control over your business and leaves you with ample time to focus on core business operations.
Well-integrated collection system
Unlike your in-house team, an outsourcing firm will have the expertise to integrate the billing and collection processes with the calculation process. Once the entire system is in place and well-integrated, it’ll be easier for your business to optimize accounts receivable management. Automated systems also reduced in minimal damages and fewer chances of overdue accounts.
The outsourcing partner will also integrate other functions such as receiving payments, invoice processing, and sales order generation. This will result in timely payment processing.