Debt recovery is essential to the financial health of your business. With more than 10% of aging dollars 91+ days overdue and default rates rising across the US, 83% of organizations say their accounts receivable (AR) team has become more crucial in recent months.
The question is how best to manage your debt collection process. While many organizations handle their accounts receivable in-house, 44% of executives now say their teams lack the tools, resources and skills necessary to thrive in the current environment.
Would they be better off outsourcing their accounts receivable management? The answer, it turns out, depends on the specifics of the firm you partner with.
Read on to discover the right AR management approach for your business – and how to choose the best outsourced AR services.
Outsourced vs. In-House Recoveries
Keeping AR management in-house provides a few clear benefits: you have complete control over your debt collection strategy and can be confident that it is perfectly aligned with your organization’s revenue targets.
This is not always the case when outsourcing your AR management. Most organizations rely on a large third-party vendor network to cover their various needs, including pre-legal and legal firms, as well as AR management service providers. Not only does this make life challenging for your in-house team, as they struggle to manage the complex network – it also leads to a lack of transparency at the accountant level.
Many third-party firms will prioritize their own needs over your bottom line, pursuing accounts when it suits them. As a result, outsourcing is not always more efficient than simply keeping your AR management in-house. But there is an important caveat to be made here.
When done with the right firm, outsourcing is undeniably the most efficient and effective way of managing your accounts receivable. The best vendors offer a level of expertise and technological sophistication few firms can achieve in-house, such as the use of AI and machine learning tools for suit-decisioning and recursive asset searching. These lead to more effective collections and a big boost to your bottom line.
So how do you decide whether you should outsource?
4 Key Factors to Choose Between Outsourcing and In-House Recoveries
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The nature and size of your portfolios
Some firms own relatively small delinquent portfolios, which may be more efficiently managed by a dedicated in-house team. However, if the nature of your portfolios is particularly complex, you may require a partner capable of improving your suit-decisioning process and providing additional support throughout the collection process – such as asset location or verification. The size of your portfolios should also be a key consideration as in-house teams may not be able to handle larger portfolios as precisely and expertly as the right firm.
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Internal resources
Outsourcing is best understood as an alternative to hiring more full-time employees. Your current team may be at capacity and unable to handle accounts receivables in addition to their current workload. This presents two questions: do you have the budget required to hire more skilled professionals? And will you realistically be able to bring the right technologies and expertise in-house?
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Business pressures
Many firms outsource AR management because their in-house team is overworked. A third-party can take the load off their backs and free employees to focus on other tasks. Equally, it may be that the stress of managing a large vendor network leads to inefficiencies, in which case you might be best served by consolidating your vendor network.
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Technology
Technology is transforming the possibilities of AR management, but most firms cannot afford to build AI or machine learning solutions in-house. If your firm wants to capitalize on the efficiency gains these technologies promise, partnering with the right firm is the best way to ensure you are not left behind as competitors embrace technological change.
Accelerate Collections with a Single Innovative Partner
At RDS, we believe outsourcing AR management should make life simpler – not more complex. For over 37 years, we’ve honed a unique model that enables financial firms to improve their AR management without the stresses of traditional outsourcing.
Our proprietary data analytics models and AI tools enable unparalleled efficiency throughout the debt collection process, producing liquidation rates 2-3x higher than competitors. And our nationwide network of collection agencies and law firms allows you to get everything need from a single vendor.
