Outsourced credit control: 5 reasons to consider it

If you can do something yourself, why pay someone else to do it for you? Well, there are lots of reasons actually. As a small business it’s easy to think that managing your cash flow is easy but there are real gains to be made in outsourced credit control.

Despite software, such as Xero and FreeAgent, which are there to make invoicing easier, managing the financial aspects of your business can be a headache. If you’re finding it a struggle to stay on top of your invoices and need help with persistent late payers, here are five reasons to outsource your credit control.

Benefits of outsourced credit control

1. Have more time

If you don’t have to chase down late payments or send out reminder notes to clients that their invoice is due for payment, you’ll have more time. More time to win new business and more time to spend on marketing and training. With any outsourcing decision, you need to think about how much your time is worth. If it’s going to take you a lot longer to do the job and your time is more valuable, it makes sense to pay someone else to do it.

Invest your time in growing your business further. Play to your strengths. Nobody expects you to be able to do everything.

2. Savings when compared to a permanent employee

Having more free time is one thing, but outsourcing credit control can also save you money. You can avoid the costs of hiring, training and retaining a fully-fledged member of staff. Staff costs include sick pay, holiday pay, payroll and pension. Plus, they’ll need a desk to sit at!

If your business is relatively small or doesn’t have a large volume of invoices going out, then you may not need a credit control service all the time. Paying for the level of service you need, when you need it will be more cost effective.

3. Maintain good client relationships

We all want to have a good relationship with our clients. These relationships can take a long time to build up and it can be one thing that breaks them. So if money problems strike, it can send our stress levels sky high.

However long we’ve been in business, many of us can find it difficult to talk about money. We have a really great meeting but then the discussion around money comes up and we can feel ourselves getting fidgety.

It’s no easier once we’ve completed the work either. To provide a service to a client and then spend ages waiting to get paid for it can be extremely disheartening, not to mention damaging to your cash flow.

If you outsource your credit control, they’ll manage that process for you. You don’t have to speak to your client about the fact they still haven’t paid. Plus, someone who is more removed from the client relationship is likely to get the money owed more quickly.

4. Support with legal action

Most clients will pay invoices on time but there will be clients who are late to pay. Sometimes, they are repeatedly late to pay or there are disagreements about the amount to be paid. By outsourcing your credit control needs, late payments or refusal to pay can be escalated with the necessary follow up.

Escalations may result in legal action against a client. In those situations, a professional credit control service can guide you through the stages of debt recovery.

5. Professional expertise

To maximise your cash flow and make budgeting more effective, you need to apply a level of professionalism to your credit control. Outsourcing the work means you can employ individuals with the right level of experience, focus and expertise.

Look out for credit controllers who are members of the CICM (Chartered Institute of Credit Management). The CICM sets the highest standards and has become the recognised standard in the credit profession.

Unless you have the necessary qualifications, it’s unlikely you’ll be able to match that level of service.

What to consider before deciding to proceed

As with any small business service, ask your peers for recommendations. Make sure you understand what is included in the outsourced credit control service. And find out if you can hire for a trial period first.

At THP, we talk to our clients about:

• Automating their credit control so invoices are paid on time
• Setting up payment terms, and
• Credit control checks and bad debt analysis.

It’s a tricky balance to collect debts and yet retain a long-term relationship with your clients. Outsourcing your credit control simply makes good business sense.

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