The InvoiceSherpa Blog

Accounts Receivable Management Services: Are They Worth It, or Is There a Better Option?

Not having a clear grasp on accounts receivable is like trying to steer a ship through a storm without a map - and with no experience. 

The fact of the matter is that small businesses (and even mid-sized companies) don’t have the time or expertise to manage AR. Hiring an employee in-house doesn’t make sense from a cost standpoint either. 

That’s where accounts receivable management services come into the picture.

On the surface, handing off the daunting task to experts and reclaiming your time and sanity seems like a smart move. 

But, while entrusting another entity with your AR might free up some bandwidth, have you considered the potential pitfalls? It can still get quite costly, and you lose a bit of control over the process.

That being said, we’re here to help you alleviate all this by guiding you through the process of finding a partner for the management of accounts receivable. 

More importantly, we’ll introduce you to a more affordable, streamlined way to optimize your AR process in-house: using our AR automation software. Before we get into all that, though, let’s start with the basics: what is receivable management services?

What are Receivable Management Services?

Accounts receivable directly influences your company's financial health. It’s the money owed to a company by its customers. Managing it effectively can be the difference between steady cash flow and crippling debt. 

AR management services are specialized services aimed at optimizing the process of collecting these outstanding invoices. This entails more than just chasing down late payments and keeping track of how much a company is owed at any given time. 

It's an intricate process involving timely invoicing, categorizing accounts based on payment history, following up on due and overdue invoices, reconciling accounts, and more. A systematic approach ensures not just timely collections but also a healthy relationship with clients.

How it Works

Once you engage a receivable management service, they'll first evaluate your current AR setup. This includes reviewing outstanding amounts, client payment history, and any existing processes. 

They then strategize a collection process tailored to your business. Regular reporting keeps you in the loop, ensuring transparency. And all the while you and your team are left to focus on core business activities that contribute to your bottom line. 

We’ll talk more specifically about the benefits of AR management services shortly, but we first need to unpack the two common types of services you’ll find.

The Different Types of Accounts Receivable Management Services

The two types of AR management services are very different in scope of work:

Chances are, you’ll be better suited to complete third-party management. This is an investment in your business that pays for itself as you’re left with more free time and less stress.

That being said, skip-tracing may make sense if your AR management isn’t necessarily a challenge, you just have a problematic client or two.

Pros and Cons of Accounts Receivable Management Services

Just like any business decision, accounts receivable outsourcing comes with its set of advantages and potential pitfalls. Let’s delve into the major pros and cons to give you a clearer picture.

Benefits at a Glance

Potential Drawbacks to Be Aware of

While accounts receivable management services offer a plethora of benefits, it's essential to weigh them against the potential challenges. 

Remember that the evolving business landscape offers even more innovative solutions, like technology-driven automation, which we'll explore in just a moment. First, let’s offer some tips on finding the right partner for the management of receivables in your company.

Tips on Finding and Vetting an Accounts Receivable Management Service Provider

So, you're leaning towards engaging a professional service for the management of receivables. This is a smart choice - but it’s also a pivotal decision that demands meticulous consideration. That’s why we’ve put together this guide to ensure you make an informed choice.

Know Your Needs: Establishing Clear Objectives

Consider what you want from a service provider before diving into the selection process.

 Is it just about follow-ups on overdue invoices, or do you require a full-suite service? 

Do you have specific industries you cater to that need special attention? 

Establish clear objectives. Knowing what you need will help streamline your search and ensure the service aligns with your business goals. From there, it’s about doing some research into the service providers that meet your needs.

Reputation Research: Seeking Out Reviews and Testimonials

A company's reputation is more transparent than ever in the age of information. You can eliminate much of your uncertainty by spending 5-10 minutes filtering through reviews and testimonials. 

Our advice is to get off a company’s website for real insights, though. Look on third-party sites like TrustPilot, Yelp, Google Reviews, or forums. 

Your best bet to find out what it’s like working with a service provider is to get in touch with existing clients. This will give you a clearer picture of the provider's effectiveness, professionalism, and customer service quality. Ideally, you’d find a service provider through a recommendation/referral from someone you trust.

Due Diligence: Inquiring About Data Protection and Security Measures

Your financial data is invaluable. Hence, ensure the service provider values its sanctity. Ask direct questions about their data protection protocols, security measures, and compliance standards.

It's not just about preventing cyber threats - it's about ensuring the agency handles your data with the utmost confidentiality.

Flexibility: Assessing Customizability and Integration Options

Your business is unique, and so are its needs. It's crucial that the service provider offers flexibility. 

Can they customize their services according to your requirements? How seamlessly can their system integrate with your current software? 

A smooth transition and the ability to mold services to fit your specific needs can be a game-changer.

Choosing the right partner can make all the difference in the realm of accounts receivable management. We hope you feel more confident in hiring an accounts receivable management company after reading through this guide.

But - what if we told you there was a better way to optimize your AR process and cash flow management? While accounts receivable management services undoubtedly have their place, you may be able to save time, money, and headaches by simply leveraging technology in your workflow.

A Better Way to Optimize Your Cash Flow Than Hiring an Accounts Receivable Management Company…

We promised at the start of this conversation today that we’d introduce you to a better way to optimize your financial management. 

And that’s where InvoiceSherpa comes in: a software trusted by the likes of Patagonia, Smartsheet, Yieldmo, Datanyze, and countless other industry-leading companies.

Leveraging technology like ours to automate AR rather than outsource it can help you get paid faster and increase your cash flow. We’ll highlight what makes our software the leading AR platform with integrated payments shortly. First, why automate rather than outsource?

Why Leverage Technology and Automate AR Rather Than Outsource?

We discuss the accounts receivable automation benefits in-depth in our complete guide. But, why would you want to handle the process in-house using technology instead of outsourcing to an accounts receivable management company? Here’s the cliff notes:

That being said, it’s no wonder companies prefer to automate rather than outsource. It’s more affordable and without the headaches of typical accounts receivable management services. But, not all AR automation platforms are equal - what makes InvoiceSherpa the right choice for you?

How InvoiceSherpa Can Help You Save Time and Stress by Collecting Debts Faster

InvoiceSherpa is a state-of-the-art solution tailored to meet all your AR management needs. It’s everything you need in one place to monitor cash flow and speed up the timeline for payments. That includes:

Getting up and running is quick and easy, too. Our software syncs effortlessly with your accounting software - be it Quickbooks, Clio, or Xero. From there, you’re able to completely automate the AR process with the initial invoice sending, late payment reminders, auto-collecting, and more.

It’s been said that a subscription to InvoiceSherpa is like hiring an AR professional for just $49 a month - with that in mind, why would you spend thousands on accounts receivable management services?

We’re so confident you’ll see an ROI from InvoiceSherpa that you can try it free for 14 days. We encourage you to learn more today or get your free trial underway - it’s time to put problems associated with cash flow and AR management in the rearview mirror!

Bringing Our Conversation on Accounts Receivable Management Services to a Close

While outsourcing your AR process to an accounts receivable management company is certainly a superior approach to handling it in-house, it’s not without its pitfalls. Outsourcing can be costly and comes with a myriad of other stressors.

That’s why more and more small and mid-sized businesses are working smarter with the help of AR automation software, like InvoiceSherpa. By leveraging your technology you’re equipped with an advanced tool designed to transform the way you manage receivables.

You can learn more about how to calculate accounts receivable or find out why cash flow management is important in our blog. But as we draw this conversation on accounts receivable management services to a close, it’s time to optimize your company’s financial management with InvoiceSherpa.

Don't just take our word for it. Experience the InvoiceSherpa difference firsthand and discover a smarter, more efficient approach to AR management. Try InvoiceSherpa free for 14 days and embark on a journey towards optimized cash flow and business growth.

Posted on October 2, 2023

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