Mani Malarvannan
Mani Malarvannan is cofounder of Cybelink, a company specializes in small business financial and accounting outsourcing like Bookkeeping, Tax, Accounts Payable, Accounts Receivable, etc. For more info visit
Mani Malarvannan has written 9 articles for SB Informer.
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Outsourcing Accounts Receivable (AR) have lots of benefit for Small Business

Mani Malarvannan

September 27, 2007

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One of the most critical accounting activities for a business is accounts receivable (AR). Ironically for a small business AR becomes very important to remain competitive. Accounts receivable outsourcing for small business is a trend that has come to stay. By leveraging dedicated and skilled manpower backed with high-end cross cutting technology, small business units can drastically turnaround locked cash to instant liquidity at a minimum process cost and utilize the resource to accelerate growth and higher returns.

Accounts Receivable Outsourcing - Its advantage

By accounts receivable outsourcing, companies gain access to top notch collection agency professionals and advanced collection agency resources even if they don't have full time AR management needs. It doesn't take a long roster of past due clients to make a big dent in a company's bottom line. According to statistics, once an account becomes 90 days overdue, your business is likely to receive only 73 cents for every dollar owed. After 6 months, the amount drops to 50 cents on every dollar and down to 25 cents after one year. Bringing a collection agency on to handle accounts receivable addresses delinquent accounts within the first 90 days, before they get out of hand.

How Accounts Receivables Matter

It is always not feasible for small business operators to implement Enterprise Resource Planning (ERP) and Line of Business (LOB) applications for data management because of high investment cost. Ultimately, management and collection costs of accounts receivables far outweigh the collection putting the small businesses in financial jeopardy.

Efficient Accounts Receivable management is thus a key task for a small business enterprise.

AR Outsourcing - Small Business Advantage

Partnering with an accounts receivable outsourcing firm has many benefits. These benefits include, but are not limited to, increased cash flow; reduced operating costs; better small business accounts receivable control; efficient management of small business balance sheet accounts, increased sales to slow paying accounts; fewer delinquencies resulting in lower collection costs; and improved customer service. According to IDC review, outsourcing business processes from US is expected grow with a compound annual growth rate of 7.1 percent through 2009, when the market is expected to reach $355 billion. Of the total spending on account of outsourcing, small and medium businesses would have a share of 29% by 2009.

The progress of small business accounts receivable outsourcing can be fairly mapped on the company’s Daily Sales Outstanding (DSO) figures and reduction in bad debt. Number of outstanding invoices drops sharply, the impact being felt more in case of very old outstanding invoices as somebody in the offshore destination handling the accounts receivable portfolio is consistently following the invoices on a day-to-day basis. Due to increased fluidity and availability of time for concentrating on more core activities, small business witness significant growth and their overall turnover improve noticeably. On the whole, this better functioning and cash flow consistently improves their bottom lines. Offshore companies deploy cutting-edge technology to carry out their accounts receivable functions without any investment impact on the outsourcing company. This technology integration adds speed and efficiency and improves customer service for the outsourcing small business. Prompt and efficient follow-up reduces delinquency, thereby offshore companies work with many customers on accounts receivable processes and they are an excellent resource on best practices across companies that can be accessed by small business companies to improve their business efficiency and generate higher returns.


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