Central process
In the fashion industry, outsourcing accounts receivable management is a household word. For cost reasons, the production of clothes often takes place in low-wage countries and is therefore outsourced to third parties. This typifies these companies as so-called head-tail companies that focus on sales & design on the one hand and logistics & billing on the other. Credit management is an integral part of these operations, with accounts receivable management as a central process. After all, it is all about paid sales.
Prerequisites for effective debtor management
Effective debtor management starts with you. In another article we already gave seven tips to avoid annoyances in this respect. In any case, it is important to declare your terms of delivery and payment applicable. Also check a customer's creditworthiness in advance and keep monitoring it. After all, when the invoice is sent, the turnover is in the books but not yet in the bank.
Why outsource receivables management?
Good debtor management can prevent debt collection procedures. About a third of all invoices in business are paid late. Outstanding invoices are unfortunately still the cause of nearly a quarter of bankruptcies. The amicable collection process (without court intervention) is a good tool to avoid the costs of a bailiff and/or lawyer and also to enforce payment while preserving the relationship. Debt collection is a logical conclusion of an order-to-cash process in case of non-payment.
However, the process of a payment reminder, reminder and call is often an understated one. It does not benefit the relationship with your buyer, and if your buyer is based abroad, the language and culture can be a barrier. These are often reasons to (partially) outsource debtor management.
Advantages of outsourcing debtor management
If you let (local) experts manage your debtors, it positively affects the average debtor term. It makes it easy to monitor Key Performance Indicators and has a positive effect on cash flow. But there is more:
- Debtors are followed up adequately and effectively. Also in case of illness, holidays and prolonged employee absences;
- With your debtor management in the hands of experts who deal with this every day and have made it their business, your incoming payment flow will receive the best possible care;
- If you are credit insured, the policy obligations are secured, giving you greater certainty of payment in the event of a claim;
- If done properly, it contributes to good relationship management;
- Outsourcing is often cheaper than in-house debtor management;
- Your debtor risks reduce and your working capital increases. You can do business in the best possible way.
Want to know more about what outsourcing your receivables management can do for your operations? Please contact us via info@xolv.nl or 073 - 820 02 95. Our specialists will be happy to talk to you.
