How Outsourcing Accounts Receivable Can Benefit Small and Medium-Sized Businesses

Managing accounts receivable is an essential part of any company’s financial management process. However, for small and medium-sized businesses (SMBs), it can be time-consuming and resource-intensive. 

In a market where efficiency and cost saving are crucial to survival, many SMBs outsource accounts receivable. 

Accounts receivable outsourcing involves hiring a third-party service provider to handle financial tasks associated with managing accounts receivable, allowing SMBs to focus on their core business functions while streamlining their financial processes. 

In this article, we will explore the specific benefits, best practices, and key considerations for SMBs when outsourcing their accounts receivable processes. We will also highlight the top services that can help you with this task. 

Benefits of Outsourcing Accounts Receivable for SMBs

SMBs face unique challenges when it comes to managing accounts receivable. Outsourcing accounts receivable can address these challenges by bringing numerous benefits to SMBs:

Improved cash flow

A US bank study found that 82% of small businesses fail due to mismanagement of their cash flow. Outsourcing accounts receivable can help you improve their cash flow by ensuring timely and accurate invoicing, collection, and processing of payments. 

With a dedicated team handling your accounts receivable, you can expect to receive payments from customers faster, reducing the time between invoicing and receiving payment.

Reduced overdue invoices

Delinquent payments can cause significant disruptions to a business’s cash flow. Outsourcing accounts receivable can help you reduce the number of overdue invoices by implementing effective collection strategies and following up with customers promptly.

Minimizing write-offs

As an SMB, in particular, you want to avoid having to write off any unpaid invoices as bad debt. 

By outsourcing accounts receivable, you can benefit from the expertise of accounting professionals who have experience in collecting payments and minimizing write-offs. This can save your business from losing money and improve financial stability.

Timely and accurate reporting

Outsourcing accounts receivable gives you access to timely and accurate financial reports. 

This can help you make informed decisions about your cash flow, identify potential issues, and plan for the future. With a clear understanding of your financial health, you can make better business decisions and achieve long-term success.

Cost savings on hiring and training internal staff

Hiring and training staff to manage accounts receivable can be costly for SMBs, especially if they do not have a dedicated accounting department. With a $5.2 trillion financing gap for SMBs across the globe, cutting expenses when you can is vital.

Outsourcing this task eliminates the need to hire and train new employees, saving you time and money. Instead, you can pay a fixed fee or a percentage of the amount collected to the service provider, making it a more cost-effective solution.

Increased efficiency and productivity

Outsourcing accounts receivable allows you to focus on your core business operations, leading to increased efficiency and productivity. 

The service provider has the expertise and resources to handle the tasks efficiently, resulting in the timely and accurate processing of invoices and payments. This, in turn, improves cash flow and minimizes the risk of late payments or bad debts.

Access to specialized expertise

Managing accounts receivable requires specialized knowledge and skills that may not be available in-house for SMBs. Outsourcing to a third-party service provider can give you access to experts with years of experience and knowledge in this field. 

They can handle complex financial tasks such as credit analysis, collections, and dispute resolution more effectively, saving your business time and resources.

Key Considerations Before Choosing an Outsourcing Partner

Outsourcing accounts receivable usually requires going through a recruiting or outsourcing partner. Here are some key considerations to keep in mind when evaluating potential partners:

Experience and expertise

It is essential to select a partner with experience and expertise in managing accounts receivable for businesses similar to yours. They should have a proven track record of delivering quality services and improving financial operations.

Communication

Effective communication between the outsourcing partner and your business is crucial for successful collaboration. 

Your partner should be able to provide regular updates, address any concerns promptly, and maintain open lines of communication throughout the process.

Technology

An excellent outsourcing partner should have access to advanced technology that can streamline your accounts receivable processes, such as automated invoicing and payment systems. 

This can help improve efficiency, reduce errors, and enhance the overall customer experience, putting you on par with larger businesses with more internal resources.

Cost

While cost savings are a significant factor in outsourcing accounts receivable, especially for SMBs with limited budgets, they should not be your only consideration. 

It is essential to evaluate the partner’s fees against their services’ quality and ensure that you are getting value for your money.

Security

Any third-party service provider handling financial tasks must prioritize data security. Be sure to ask about their security protocols and measures to protect your sensitive financial information.

Reputation

Research the outsourcing provider and read reviews from other SMBs who have used their services. Their reputation in the industry can give you valuable insights into their reliability, trustworthiness, and quality of services.

Top 5 Outsourcing Companies for SMBs

Now that you’re prepared to select your outsourcing partner, here are our top picks (in no particular order) for recruiting and outsourcing firms with accounts receivable services and experience working with SMBs:

1. Near

Near is a top pick for SMBs looking to outsource accounting, specifically their accounts receivable processes. 

As a recruitment firm specializing in helping SMBs recruit experienced professionals based in Latin America (LatAm), we have extensive experience working with these firms and understand their unique needs. 

We provide comprehensive support throughout the entire hiring process, making it easier for you to find the right outsourced accounts receivable professional.

For instance, we saved the SMB Kordis $109,000 annually by helping them hire a remote staff accountant and executive assistant from LatAm, where salary rates are more competitive than in the US

2. Pacific Accounting & Business Services (PABS)

Accounting, finance, and back-office service provider PABS is a global firm with locations in the US, Australia, India, and the UK. It is certified in QuickBooks, Xero, Sage, and ISO and has experience helping many SMBs.

The company’s wide range of accounts receivable services include maintaining the sales ledger, preparing and delivering periodic statements, customer onboarding and workflow implementation, and generating invoices and authorization.

3. Steph’s Bookkeeping Service

Steph’s Books is a bookkeeping service with experience helping small businesses in the Chicago, Illinois, area. Through over 25 years of experience, it has accumulated a five-star rating on Google and is a certified QuickBooks ProAdvisor.

Its services include accounts payable and receivable, bookkeeping, payroll, QuickBooks training, cleanup and catch-up, bank reconciliations, and tax preparation.

4. Invensis

With over 20 years of experience, Invensis has helped over 1,500 small businesses from its headquarters in Lewisville, Texas, and beyond. It specializes in most accounting tools and is a DesignRush Verified Agency.

The firm’s accounting and bookkeeping services for small businesses include accounts receivable, payroll processing, cash flow management, accounts payable, recording financial transactions, reconciling bank statements, budgeting and forecasting, and more.

5. Digital Minds BPO Services

Digital Minds is a business process outsourcing (BPO) company and Philippines call center based in the US and the Philippines. It is GDPR-compliant and has experience helping businesses of all sizes using popular accounting software options.

Its accounts receivable management services include accounts receivable factoring, billing, invoice processing, bookkeeping, preparing accounts receivable reports, updating accounts receivable, payment processing, and more.

Final Thoughts

Outsourcing accounts receivable can be a game-changer for SMBs. It allows you to focus on your core business activities while improving efficiency, cash flow, cost savings, and more. 

Near can help you find the perfect candidate for your business requirements in terms of experience, cost effectiveness, communication, security, reputation, and technology. 

Don’t let managing accounts receivable hold back your SMB’s growth potential. Contact Near today to learn how we can help you find the best outsourced accounts receivable experts for your business 50–70% faster than a traditional hiring process. 

Book a free consultation call and let us help you take your financial management to the next level!