February 29, 2012: Cash flow is essential for any organization and it is critical in the case of small firms for their survival. When it comes to small organizations, it is observed that there is a lack of adequate staff who will take responsibility of the cash flow. More over such organizations do not have in place an accounts receivable management system that will take care of specific situations that they come across.
Cash flow is critical in the case of large organizations too. Large organizations nowadays are trying to outsource this activity of theirs. While looking for options to outsource collections of an organization, price alone should not be taken into consideration for entering into a contract with the service provider. The organization before entering into outsourcing contract should closely observe the experience of the service provider in the field, the kind of service they provide, and collection ratio. Another important factor to be considered is the customer retention from the part of the service provider.
A question that might arise in many of the organizations is whether to outsource collection of small amounts to a collection service provider. In case there is a service provider with adequate programs and systems, then the organizations can go for outsourcing collections to such a service provider. Even if the amount to be collected is small, there will be considerable saving and the in house resources can be utilized for the expansion of the business.
Small businesses can go for service providers with flat fee collections system, as it is more economical for them and will bring more saving on their receivables. Outsourcing collections to a third party service provider is more cost effective when compared to heading straight to the court system. Going to court will help in securing a judgment in favor of the company, but getting the payment will be delayed and will cost time and money for the company.
Another advantage with outsourcing collections to a reputed service provider is that it can be of great use in cases where the customers do not pay ever after the period extended to them. There may be instances when the customers do not pay for the product or service even after 90 days. In such cases, outsourcing collections is the best move. The collection service provider will help in bridging the gap between the company and the customer and thus will solve the issue without trouble. This will even help in retaining the customers.