Benefits Of Small Business Outsourcing Accounts Receivable

One of the most critical accounting activities for adocuments, routing them to concerned individuals,
business is accounts receivable (AR). Ironically forand providing easy access to the documents in a
a small business that operates with limited capital,timely fashion is indeed a very complex task for
AR becomes very important to remainsmall business involving deployment of skilled
competitive. In today's credit linked businessmanpower and enabling systems. Ultimately,
environment, it is very relevant & efficiencymanagement and collection costs of accounts
can be much better harnessed and at a muchreceivables far outweigh the collection putting the
lower cost. With the offshore service providersmall businesses in financial jeopardy.
taking care of this aspect, the small business hasEfficient Accounts Receivable management is thus
more time and flexibility to attend to other corea key task for a small business enterprise.
business areas like procuring orders, improvingAR Outsourcing - Small Business Advantage
service delivery and mobilizing resources.Small business operates with less manpower and
Accounts receivable outsourcing is thus a trenddo not have the ability to deploy highly expensive
among small business today.credit recovery mechanisms in their own country.
Advantages of Accounts Receivable OutsourcingAgain, no-credit business is absolutely unthinkable
Recovering past due accounts without spendingin today's perspective. Just by outsourcing small
more in staffing and training is one of thebusiness accounts receivable to an offshore
greatest challenges for a small business. Mostdestination like India where there is an abundance
often, companies write off this receivable amountof technically competent and skilled manpower at
as loss because the cost to train and hire alabor costs in the range of almost one-tenth of
qualified in-house staff to manage them outweighsthe rates in USA, small business can leverage best
the cost of collecting the debt. This predicamentresources to attend a critical business domain that
for small business is now set to come to an end.is very much relevant to its sustainability and
By outsourcing accounts receivable, small businessviability.
can avail a less expensive - and often higherPartnering with an accounts receivable outsourcing
quality solution and achieve significantly higherfirm has many benefits. These benefits include,
collection efficiency, thereby improving liquidity andbut are not limited to, increased cash flow;
company bottom lines.reduced operating costs; better small business
By accounts receivable outsourcing, companiesaccounts receivable control; efficient management
gain access to top notch collection agencyof small business balance sheet accounts,
professionals and advanced collection agencyincreased sales to slow paying accounts; fewer
resources even if they don't have full time ARdelinquencies resulting in lower collection costs; and
management needs. It doesn't take a long rosterimproved customer service. According to IDC
of past due clients to make a big dent in areview, outsourcing business processes from US
company's bottom line. According to statistics,is expected grow with a compound annual growth
once an account becomes 90 days overdue, yourrate of 7.1 percent through 2009, when the
business is likely to receive only 73 cents formarket is expected to reach $355 billion. Of the
every dollar owed. After 6 months, the amounttotal spending on account of outsourcing, small
drops to 50 cents on every dollar and down toand medium businesses would have a share of
25 cents after one year. Bringing a collection29% by 2009.
agency on to handle accounts receivableThe progress of small business accounts
addresses delinquent accounts within the first 90receivable outsourcing can be fairly mapped on
days, before they get out of hand.the company's Daily Sales Outstanding (DSO)
How Accounts Receivables Matterfigures and reduction in bad debt. Number of
Sales that have not yet been collected as cashoutstanding invoices drops sharply, the impact
reflect Accounts Receivable. In today's creditbeing felt more in case of very old outstanding
based business environment, small businesses sellinvoices as somebody in the offshore destination
their merchandise or services in exchange for ahandling the accounts receivable portfolio is
customer's promise to pay at a certain time inconsistently following the invoices on a day-to-day
the future. Timely collection of accountsbasis. Due to increased fluidity and availability of
receivables is an extremely important source oftime for concentrating on more core activities,
cash inflows. If this management is bad, smallsmall business witness significant growth and their
business may not have sufficient liquidity to meetoverall turnover improve noticeably. On the whole,
its own expenses. Moreover, accounts receivablethis better functioning and cash flow consistently
portfolios can amount to 21 percent to 34improves their bottom lines. Offshore companies
percent of a small business company's assets.deploy cutting-edge technology to carry out their
Inefficient collection can amount to 25% of theaccounts receivable functions without any
asset base of a small business could put the veryinvestment impact on the outsourcing company.
existence of the business at stake.This technology integration adds speed and
For a small business, like any other enterprise,efficiency and improves customer service for the
accounts receivable also represent an investment.outsourcing small business. Prompt and efficient
The money locked up in accounts receivable isfollow-up reduces delinquency, thereby offshore
not available for meeting the costs of running orcompanies work with many customers on
expanding the business. The return from anaccounts receivable processes and they are an
investment in accounts receivable doesn't occurexcellent resource on best practices across
until the customers clear their invoices.companies that can be accessed by small
Day-to-day management of accounts receivablesbusiness companies to improve their business
is traditionally paper intensive, time consuming andefficiency and generate higher returns.
expensive. Invoices, payments, purchase orders,Accounts receivable outsourcing for small business
and statements are often received via mail, fax,is a trend that has come to stay. By leveraging
or email. It is always not feasible for smalldedicated and skilled manpower backed with
business operators to implement Enterprisehigh-end cross cutting technology, small business
Resource Planning (ERP) and Line of Businessunits can drastically turnaround locked cash to
(LOB) applications for data management becauseinstant liquidity at a minimum process cost and
of high investment cost. Even if they manage theutilize the resource to accelerate growth and
cost, capturing information from hardcopyhigher returns.