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Blog » Beat Accounts Receivable Challenges through Outsourcing

Beat Accounts Receivable Challenges through Outsourcing

Last updated: 10 Oct, 2023 By | 6 Minutes Read

Accounts Receivable Challenges

When we look at the world of accounting, Accounts Receivable (AR) is a term that refers to the money owed to an organization by its customers for goods or services that are already delivered but not paid for. It is important to a company’s cash flow and overall financial health.

However, for each organization, the management of AR can pose a challenge. This challenge could comprise problems like delayed invoicing, issues with payment collection, high levels of outstanding debt, and risk of fraud. According to recent studies, businesses tend to write off 1.5% of their receivables as bad debt due to multiple factors, including mismanagement of responsibilities.

Organizations can tackle all of these challenges by adopting the right set of processes. Businesses can train their resources and also ensure to adapt an agile model to speed up processes. Another option to consider could be to outsource accounting services.

What are some of the Accounts Receivable challenges that organizations face, and how can outsourcing help?

Challenge 1: Delays in invoice processing

One of the key challenges of managing accounts receivables is meeting the invoices’ deadlines. Multiple factors, such as a high volume of invoices, lack of resources, and outdated systems can cause the delay.

Outsourcing accounts receivable services can help you overcome this challenge. It provides access to a team of experts who are equipped with the latest tools and technology. These experts can process invoices quickly and efficiently, reducing the risk of delays and improving overall efficiency.

Challenge 2: Increased Days Sales Outstanding (DSO) and difficulty in improving collections

Accounts receivable outsourcing can help businesses overcome this challenge by using advanced tools and techniques to speed up the payment process, such as automated reminders and direct debit options.

This can help businesses improve collections and reduce DSO, which is crucial for maintaining a healthy cash flow.

Challenge 3: Increased risk of fraud

Outsourcing providers can help businesses minimize this risk by implementing advanced security systems and protocols, such as encryption, firewalls, and multi-factor authentication, to protect sensitive financial data from cyber threats.

Additionally, outsourcing providers often possess a thorough understanding of industry best practices and regulations, which can help businesses stay compliant and reduce the risk of penalties.

Challenge 4: Limited scalability options

When businesses grow and expand, managing accounts receivable processes is difficult. Outsourcing providers can help companies to overcome this challenge by providing access to additional resources and expertise as needed, enabling businesses to scale their operations without incurring additional costs.

Additionally, outsourcing providers can help enterprises identify and implement best practices that can improve scalabilities, such as automation and process optimization.

What are the Top Benefits of Outsourcing Accounts Receivable Services?

1. Helps with increased efficiency

This acts as one of the primary benefits of outsourcing accounts receivable. Outsourcing helps businesses to delegate time-consuming AR management tasks to expert professionals who are well-acquainted with multiple processes and tools to manage these tasks effectively. This team of professionals could also utilize the best-in-class technology to ensure that your organization offers the best services.

By outsourcing your accounts receivable services, you can free up the bandwidth of your internal resources by enabling the business to focus on its core competencies and grow operations. The best outsourcing service providers also manage to process invoices faster than in-house teams. As a result, it reduces the risks of delays and improves overall efficiency.

2. Improves cash flow

Businesses can benefit from effective and timely collections of outstanding debts when they entrust their AR management services to a third-party provider. Outsourcing companies leverage advanced tools and techniques to help businesses speed up the payment process. These could include the addition of automated reminders or direct debit options.

In the long run, the companies can benefit from improved cash flow and a strong financial position by implementing the right strategies.

3. Helps in the reduction of costs

Outsourcing accounts receivables services help businesses save up on costs as well. The primary reason behind this is limited or no need to hire internal resources. The expenses pertaining to infrastructure, software, and equipment are also minimized.

Outsourcing providers are also able to provide economies of scale, and hence organizations can benefit from lower costs per invoice processed.

4. Enhanced data security

When you outsource your accounts receivables responsibilities, you can experience enhanced data security. Outsourcing providers are often equipped with advanced security systems and protocols, such as encryption, firewalls, and multi-factor authentication, to protect sensitive financial data from cyber threats.

This can provide peace of mind and help businesses comply with regulatory requirements.

    What are some of the best practices for outsourcing accounts receivable services?

    1. Choose the right outsourcing partner

    Select a provider with a proven past track record of success in managing accounts receivable and one with all the necessary resources, expertise, and technology to meet your business requirements. Cogneesol provides excellent outsourcing accounts receivable services that can be altered and utilized as per your business needs.

    2. Finalizing the right flow of communication and reporting

    When you onboard an outsourcing partner, ensure to set up regular check-ins and meetings to discuss progress, address any issues, and ensure that goals are being met. You must also set up a reporting system that tracks key performance indicators, such as invoice processing times, DSO, and collections.

    This will help you monitor the progress of your accounts receivable management and ensure that your outsourcing provider is meeting your expectations.

    3. Ensure the right amount of data security

    Choose an outsourcing partner with robust security systems and protocols in place. This includes detailed encryption, firewalls, and multi-factor authentication.

    In addition, establishing clear guidelines and protocols for handling and protecting sensitive data is important, and ensuring that your outsourcing provider complies with relevant regulations and industry best practices.

    4. Continuously monitor and improvise your processes

    You must regularly review and assess the performance of your outsourcing provider to make adjustments as needed. Also, look for opportunities to optimize and streamline the Accounts Receivable process, such as by implementing automation and process optimization.

    By continuously monitoring and improving the process, businesses can ensure that their accounts receivable management is running smoothly and effectively.


    Through this blog, we analyzed the benefits of outsourcing accounts receivable services and how they can help tackle business challenges. We also looked at the best practices that businesses should consider while onboarding an outsourcing partner.

    Cogneesol helps your organization with the best accounts receivable services and follows all of the best practices mentioned above. Get in touch with an expert to better understand the offerings that can suit your business requirements.

    Contact us at +1 833-313-3143 or send an email to [email protected].