4 key considerations to guarantee success when making the decision to outsource debt collection or credit-control.
Whilst many larger businesses will use an outsourced partner to support their inhouse collections, some businesses still have concerns which prevent them making the decision to outsource debt collection or credit-control. Fear of potentially damaging those all-important customer relationships, concerns over costs, or even worries of outsourcing highlighting inefficiencies within an existing inhouse team mean many businesses sit on increasing volumes of ageing ledgers – increasing DSO and their risk of bad debt.
To help businesses which are wrestling with making the leap to outsourcing their debt collection or credit-control we address 4 common questions below:
What are the benefits of outsourcing?
- Access expertise
- Ensuring invoices get paid is the primary function of every outsourced credit management or debt collection service provider. This therefore mean they invest time and resource in ensuring they have the most up-to-date techniques and technology to ensure their collection process is efficient and effective. By buying their service you are accessing a knowledge base built up over time and multiple customers.
- Make best use of your inhouse team.
- Whether your inhouse team is tied up dealing with inbound queries from smaller accounts or is drowning in disputes and defaults – if they are unable to prioritise the calls where they can add the most value, they are not working at their optimal efficiency.
- A flexible and scalable outsourced solution can provide the capacity to ensure all your accounts are touched. This will enable you to identify and resolve disputes before they turn into defaults minimising your risk of ageing ledgers and bad debt. Touched with an outbound credit-control call, fewer customers should have a need to call in – reducing those burdensome inbound calls. This will ensure your team can focus on the areas where they can add the most value ensuring you optimise your cash collection.
- Reduce costs
- Unlike inhouse teams which are a fixed overhead, outsourced services are typically provided for debt collection on a no-win-no-fee basis, so you only pay if your invoice is successfully recovered. Meanwhile credit-control can be provided as either short- or long-term rolling contracts– ensuring you only pay for resource when you need it.
- Avoid having to write off unpaid invoices
- When you identify your inhouse team are struggling with the workload it is critical act swiftly and decisively to avoid unnecessary write offs. Whether it’s ensuring all your accounts receive a credit-control call to reduce defaults or working those ledgers before they age, securing access to the right resource at the right time is key. Outsourcing provides a flexible, scalable resource to enable you to service peaks, whilst avoiding having to pay unnecessary costs during the troughs.
How do I decide what debt collection I should outsource?
As every business has different pain points it is impossible to come up with a hard and fast rule which works for everyone. A good agency will work with you to get an understanding of your entire credit and collections process and develop an outsourced debt collection strategy that will work to address the specific needs of your business. However, some common strategies used include:
- Non-key accounts
- High value debts
- Low-value debts
- Debts which inhouse teams have been unsuccessful at collecting
- Everything over certain age (90/180 days)
- Aging ledgers
Is there an optimal time to outsource debt collection?
It is statistically proven that the sooner you outsource a debt the easier it is to collect. This is why most debt collection agencies contingency charges increase with the age of the debt. If you are unlikely to be able to swiftly service those ageing ledgers inhouse, in makes sense to outsource them as quickly as possible. Many businesses will have a set up where all debts past a certain age are passed to their outsourced partner ensuring a seamless process and avoiding the accumulation of ageing ledgers.
How do choose the best outsourced debt collection provider for your business.
Often the best place to start your search is through personal recommendations – these will give you an insight into what it is like to work with the company and the results they can deliver. However, there are a multitude of agencies out there and Google can be a powerful tool to help you find them. This can be useful if you are looking for an agency with a specific skill set – such as international expertise or experience within a specific sector.
When making the decision on which agency will be best for your business it is important to look at their:
Expertise – are they an established company with strong knowledge of the credit and collections process and a proven track record of delivering results?
Testimonials / Recommendations / case studies – are their existing customers prepared to make a recommendation or highlight their success story? It is also worth asking to speak to an existing client and find out what it is like to work with them and why they chose them as their outsourced partner.
Experience: For some businesses specific industry knowledge can be critical to delivering success. For example, the energy industry when the ability to understand complex billing issues and recalculate bills is essential. If an outsourced provider has experience in your sector, they will already understand the pain points in your collection process and may have some tried and tested strategies to help you overcome them.
Credibility: Check for regulation by key industry bodies such as the FCA and accreditations such ISO 9001
Ashley Barratt – CEO Barratt Smith Brown
Leicester based Barratt Smith Brown, has established a strong reputation for providing market-leading debt collection support to the utilities sector. Leveraging CEO Ashley Barratt’s 15 years of experience at Centrica, they have not only provided outsourced support to key industry players such as Business Stream, Bristol Energy and Shell, but have taken a lead role in managing collections for UK energy administration collections – handing over 75% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide.