6 Benefits To Oursourcing Debt Collection Services

Posted by John Able on March 6th, 2020

Overview

U.S. consumer debt has risen to more than trillion in the first quarter of 2019.  This surpasses the previous high of 2008 when global financial markets went into a tailspin. This consumer debt is categorized in credit cards, mortgages, auto loans, and in student loans.  Consequently this rise in  debt can place a business in financial risk of managing their account receivables (AR).

A customer's payments get delayed or stop for a variety of reasons. Also, many businesses do not have the time to consistently follow up their payments until it’s too late.  Finally debt collection efforts is normally not the core business of many businesses and distracts and wastes time and resources.

Outsourcing debt collection services helps improve your business efficiency and can reduce the risk of financial lost.  So your business can reduce the risk of non-payments from customers that are about to go into default.

Here are six benefits your company can gain if you decide that outsourcing debt collection services is the solution for your particular situation.

1 – Improve Efficiency

Outsourcing debt collection services reduces the time and resources your company needs to dedicate collect past due receivables. Why is this?  Because this is the outsource provider's core business function. As a result your company gets to focus on it core business.

The debt collection process is detailed, sensitive and stressful work.  That's why your company’s in-house personnel often struggle balancing the collection activities with their other job priorities. So, by outsourcing debt collection services, your company personnel and resources get to focus on their core responsibilities.  As a result this will increase your company’s productivity and revenue.

Your company's late or non-payments receivables are reduced since your debt collection outsourcer dedicates their resources to the task.   Also it is important to note that a debt collection outsourcer must produce positive results to maintain its clients.

2 – Improve Cash Flow

Many companies struggle with their cash flow management.   As a result  this has a very negative effect on your business, because your company is denied the cash flow it needs to operate.

Outsourcing debt collection services helps companies reduce or eliminate cash flow “gaps” that are key to cash flow management.  There are a variety of components affect this (credit terms, policy, inventory and accounts payable), but the key one is accounts receivables.

Accounts Receivables

Most companies offers credit terms and as a result accounts receivable payments are likely the most important source of cash inflows. Therefore if your company offers credit, it needs to prioritize this. But a company's internal staff often has difficulty staying in touch with it’s customers concerning their outstanding payments. As a result collecting on your company’s AR is often overlooked or pushed aside for other business activities. Outsourcing debt collection services helps your company smooth out your company’s cash flow. Also, your customer defaults are significantly lowered since you maintain strict monitoring of your receivables and Credit Terms.

3 – Lower Debt Collection Time

Outsourcing debt collection offers experienced personnel who are comfortable making collection calls to your customers. They are knowledgeable about the rules and regulations that govern debt recovery.  Also they have the systems and infrastructure to streamline the process.

Consequently this reduces the average time spent on per-account collections activities .  Also you will get a higher success rate of customer payment. Finally this increases the number of past due receivables collected and reduces your company's Debt Sales Outstanding (DSO), improving your company’s cash flow.

And, if your company has high sales seasonality, using outsourcing debt collection services can supplement your in-house collection personnel.  This helps maintain your DSO and company liquidity.  Basically less stress for you and your collection personnel.

4 – Reduce Collection Costs

When a company invests in an in-house collection strategy, this is due to the desire to directly manage customer accounts and business relations.   There is the perceived savings in cost rather than using an external provider. But, an internal debt collection strategy comes with the price of investing valuable time, capita and human resources.

Often the cost of performing collection tasks in-house is more than outsourcing debt collection services.  Especially when you consider the cost of hiring, training, and paying employees to perform debt collection,

A debt collection outsourcer has the systems and technology that small companies often do not have.  As a result this allows them to administer your company’s accounts receivables to prioritize their collection personnel to bring in the highest volume of revenue in the shortest amount of time.

5 – Maintain Client Relations

All businesses understand the importance of maintaining healthy client relationships. So, when you outsource debt collections your company gets to maintain a positive, professional relationship with your delinquent customers while they administer the direct communication of collections activities. Also, contacting customers about their late payments takes an emotional toll on business professionals. Consequently reminding your customers that they owe you money, is never an enjoyable conversation. But, avoiding or delaying contact is not a good way to reduce your accounts receivable. Instead, you need to contact delinquent customers as soon as possible in the collection cycle to improve the recovery rate of at-risk accounts.

6 – Consistent Debt Collection Policy

A company needs to communicate with its customers the importance it places on consistent, on-time payment of invoices.  Failing to formalize your company’s debt collection policy and being consistent in following it will result in hurting your debt collection efforts.

Basically when your company is not consistent in its debt collection policy, your clients will not take you seriously when it comes time to prioritize paying invoices. This is one of the primary reasons for customers not paying on time or not paying at all.

If your customers understand that your debt collection policy is an important matter, they are much more likely to pay your invoices on time.  Especially if your debt collection policy states that past due accounts are automatically sent to an outside debt collection agency.

Conclusion

Using outsourcing for your debt collection services helps improve cash flow by reducing customer bad debt. Additionally  this lowers collections costs, reduces waste of internal company resources, maintains strong client relations, and save times and minimizes distractions related to collection activities.

Please call us at (888) 339-6699 to discuss how our call center debt collection services will serve your business needs or Contact Us.