Outsourcing Credit and Collections: 7 Common Pushbacks and how to overcome them

When it comes to credit-control and debt collection outsourcing, it is very common for businesses to have concerns over whether they are making the right decision. And fear and doubt can often lead to decisions based on false assumptions rather than facts. Outlined in this article are 7 of the most common pushbacks the 4D Contact team encounter when working with clients to develop an outsourced credit and collections solution to meet a challenge they have been unable to overcome internally.

1. It will ruin our customer relationships

The most common misconception is that outsourcing any part of your credit and collections function will have a negative impact on your customer relations. In fact, outsourcing can strengthen customer relations. Read Article: How credit management can increase sales

A credit-control call can very often be the only contact a customer has with your business post sale. By approaching it as a customer care call, issues and disputes can be swiftly identified and resolved. This will not only remove barriers to payment but also any barriers to securing further businesses with your customers. By delivering 100% of your client base with a customer contact call, often impossible with inhouse teams who have limited resource and therefore need to prioritise key accounts, you can make all your customers feel valued and considered.

2. We can do it just as well inhouse

If you have an inhouse collections team and have identified a challenge within your credit management process, it is likely that your inhouse team are already over-stretched. It is therefore unrealistic to believe that they will have the capacity to handle any additional workload without making compromises elsewhere.

Outsourced credit and collections solutions are both flexible and scalable. You can access the resource you need, when you need it, without compromising your day-to-day activities or paying for resource when you don’t need it. Targeted on results – and usually for debt collection work on a no-collect no-fee basis – they will focus on delivering your business solutions that meet agreed goals within an agreed timeframe – without impacting on your day-to-day activity. Read: Insight and resolution: How order-to-cash digital transformation enabled Travis Perkins to identify and resolve their process issues

3. It will suggest my inhouse team aren’t doing their jobs properly / I’ve not been managing them correctly

With a limited inhouse credit management resource you will only ever be able to deliver limited results. Inhouse teams will always be forced to make decisions about where to focus resource to deliver optimum results – whether this is accounts or ledgers – compromises will need to be made. For most Credit Directors and Credit Managers the challenge is making the right compromises to ensure those all-important financial targets are met.

Using an outsourced resource alongside your existing inhouse team can ensure you not only deliver but exceed targets. Whether it is taking on the challenge of lower value customers who wouldn’t usually receive a credit-control call or ageing ledgers which would never be touched, outsourced credit management solutions can increase cash collection, and ensure you deliver those key metrics of reduced DSO, ageing buckets and BDA.

4. My inhouse team will lose their jobs

It is important to think of outsourcing as supporting inhouse teams – not replacing. An inhouse team understands your internal systems and processes better than any external agency. They are ideally positioned to resolve complex cross divisional disputes and manage your key client relationships.

Outsourced credit management will enable your team to focus on the areas where they really add value – helping them to feel valued and appreciated and your business to achieve its financial targets – which in turn helps secure the company’s financial resilience and the long-term employment security of all staff.

5. Inhouse and outsourced teams won’t work together

Outsourced credit management teams are highly experienced at working with inhouse staff. They will work with your inhouse team to understand existing processes and ensure that the outsourced work is both complimentary and delivers results. Establishing upfront key reporting lines between your inhouse and outsourced team will ensure your inhouse staff don’t feel incumbered by any external resource requests and that your outsourced team receive the support they need to deliver results.

6. Credit Management Outsourcing is expensive.

Outsourced credit management does come at a cost, but a cost than can easily be off set if it results in you getting the money you’re owed.

Most debt collection agencies work on a contingency basis, so they only get paid if they can recover the money. If they are collecting ageing ledgers that your inhouse team would never have time to touch this can only be considered upside.

Credit-control is usually charged at an agreed fee dependent on the headcount required to service the business. This will usually be substantially cheaper than increasing your inhouse headcount to service the need, can be implemented almost immediately with no need to train new staff, and can be scaled and flexed to adapt to the workload ensuring you only ever pay for the service you require.

7. Outsourcing credit-control or debt collection should be a last resort.

Anyone in the business of credit and collections knows the statistics – the older the ledger the harder it will be to collect. If your business has a growing ledger, it is critical to act to quickly before the debts start to age. The quicker you act, the more likely you are to collect what is owed, you will pay less commission and minimise your business’s bad debt allowance.

Author: Richard Brown

If you have a challenge within your credit and collections process and would like to discuss how 4D Contact outsourced credit management solutions could help, please click here to request a call back.

Contact us now at sales@4dcontact.com or on 020 37691487 for a no-obligation quote.

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