Companies face the burden of delayed payment that puts much pressure on cash flows and take up the sales time from sales process activities.

The importance of timely, efficient and effective debtor collection management cannot be underestimated. But some organization, finding the time or resources to manage debt overdue can be a challenge.

In India B2B Debtors are usually of the following types:

1. Collections from the Central and State Governments – Departments, PSU’s, Hospitals, State and District bodies etc.
2. Direct B2B Customers – Business houses, MNC’s, Large Indian & SME businesses –
3. Trade Channel – Dealers and Distributors (partnerships / proprietors)

Most debtors pay on time, but there are always some constantly delaying customers, outsourcing the collections from these customers to a specialist ensures that the task of recovering the dues timely from these customers, receives a consistent, focused, expert approach.

To help you to decide whether the outsourcing for debtor collection is a good option or not, we look at some of the reasons, risks and rewards associated with outsourcing the overdue debtor collections

1. The Reasons to consider Outsourcing the Receivables

There are so many reasons why businesses increasingly choosing to outsource their B2B debtor collection process.

• Faster Results: Any late payment from a customer has a direct impact on cash flow. Late payments hamper future forecasts and making everyday activity challenging. When the debtor management process is outsourced, there will be experts and focused services providers aiming to reduce your daily sales outstanding and your overdue receivables and help maintain a healthy cash flow for the business.

• Expertise: All businesses don’t have the requirement to employ a full-time debt management staff so the internal teams take on overdue debtor collection even if they don’t have expertise in that area. In contrast, outsourced B2B debtor collection companies perform debt collection and resolution tasks every day, they have bandwidth, reach, knowledge and experience and prevent the businesses from wasting time on unprofitable administrative tasks and refocus on facilitating growth.

• Not a Cost, till money is collected: There is always a “fixed” cost associated with the employees for recruiting, training and benefits etc. Outsourcing debtor collections on a success fee basis, provides financial benefits, as the cost is incurred, only after the overdue debtor gets collected.

2. The Risks associated with the Outsourcing Process

As with outsourcing any business function, there are associated risks to consider that can be mitigated by choosing an established and experienced service provider that enables collections management as well as customer management.

• Less control: When outsourcing a key function, particularly one that is customer facing, there is worry around loss of control and how the customer will be treated. Our outsourced service is designed to give each client visibility of activity and progress and setting goals and targets so that both the parties know exactly what they should be delivering, further the teams are expert in customer management.

• Risk of miscommunication: Clients often worry about a breakdown in communication when a business function is being outsourced. We work as an extension of the clients accounting, sales, and operating teams and build a relationship with your customers, so that the customers understand the activity and processes for which GGA has been hired.

• Employee morale may be affected: the employees may feel that their job responsibilities may change OR they might be laid off due to outsourcing. An open communication about the decision can help to reduce the negative impact.

3. The Rewards of the Outsourcing the Debtor Collections

A successful overdue debtor collection assignment will help businesses tackle late payment, reduce the DSO and add to the cashflow, the benefits of an effective strategy with a reputable debt management can be much further reaching.