Would outsourcing your credit control bring big benefits to your business?

23/09/2021

For any business trading on credit terms, the effective performance of the credit control function is fundamental to the company’s financial health and stability.

Regardless of whether you have a dedicated team in place or credit control falls to the owners/directors of the business, for instance, its importance is no different. If you don’t have a robust and efficient system in place, customers are unlikely to pay your invoices on time, which could well lead to increased costs, cash flow issues and potential missed opportunities for growth.

While there are a number of tactics and strategies businesses can implement to improve their internal processes, for many it can be far more cost-effective, efficient and simpler to outsource the entire function to a specialist agency. The key is being able to identify when this represents the right approach for your business.

This article explores the tell-tale signs your business could benefit from outsourcing its credit control, the main advantages of doing so, which companies are typically best suited to using an agency, how much it costs, and crucially how to find an effective and professional partner that complements your business.

Signs your business would benefit from outsourcing credit control

Outsourcing your credit control is no different to outsourcing your payroll, HR, marketing or IT, for instance. The goals are to access better expertise, remove the burden from your business, get better results and reduce overheads.

While credit control outsourcing can suit a wide range of businesses, there are probably three clear indicators that you might wish to explore it as a priority:

Customers regularly pay late – or not at all

This is the main reason businesses choose to outsource their credit control: to improve performance and get paid faster.

Credit control is rarely straightforward and can be difficult to perfect, with customers often stretching the boundaries of what’s acceptable and testing you by coming up with an array of excuses as to why payment will be delayed.

Putting processes and systems in place to manage credit control effectively is often a significant investment – not to mention the cost and effort of recruiting and training staff – so often the best way to improve credit control performance is to outsource the function entirely.

That’s because a credit control agency will provide dedicated and professional staff that possess the experience and skillset to collect timely payments from customers, improving your DSO/debt turn and cash flow as a result.

Likewise, outsourcing can be invaluable for businesses which experience fluctuations in trading as there is no need to carry the cost of in-house resource all year round. Outsourcing enables you to tap into credit control expertise as and when it’s needed around busier trading periods.

You don’t have the time to dedicate to credit control

This is a common issue in businesses without a dedicated credit control team in place, but it can also be the case for larger companies – especially where chasing late paying customers is consuming a great deal of the credit control team’s time.

Credit control is a time consuming task, with the process beginning with credit checking potential customers before an order has even been placed – not just chasing when the invoice is due. If your credit control staff or the person responsible lacks sufficient time to keep on top of fully managing the ledger, or you don’t have the required expertise in-house, this is another sure sign that outsourcing could be a great option for your business.

Whilst providing the resource to effectively manage your credit control and contact customers at key times throughout the credit period, the other primary benefit of using a credit control agency is that they’ll give you back the time to focus on other areas. This is especially important where resource is limited, or the person responsible for your credit control juggles this role amongst others.

You struggle to recruit or retain credit control staff

Many businesses regard their staff as their biggest asset, and this is especially true for credit controllers. A strong credit controller will be worth their weight in gold, as finding someone who’s both experienced and effective can be a challenge – and sometimes expensive.

A high turnover of credit control staff resembles a big challenge for businesses as, not only does this lead to higher recruitment and training costs, it will naturally disrupt your credit control. It’s not just the settling in period as new members of staff get accustomed to your processes, systems and culture; any period where you find yourself short-staffed provides a window for essential processes to be missed, potentially putting your business in a vulnerable position if payments are subsequently delayed.

This goes for when staff take annual leave too, call in sick or go on parental leave. These can create big challenges, especially at companies which don’t have a large credit control team in place.

So regular staff turnover is a common prompt for businesses to explore outsourcing their credit control – either the entire function, or perhaps on an interim basis to cover resource shortfalls or to support the existing team.

Why do businesses outsource their credit control?

• Improve performance and efficiency, reduce DSO/debt turn and get paid sooner by customers
• Benefit from the improved cash flow position this creates and the ability to budget more accurately
• Regain the time to focus on core activity and growing the business
• Gain access to the resource and expertise of credit control specialists
• Adjust credit control resource easily in line with invoicing patterns
• Avoid the costs associated with recruiting, training and retaining employees
• Avoid the disruption created by credit control staff illness, annual leave or parental leave
• Reduce the requirement for additional funding, saving money on borrowing costs
• Gain peace of mind that the credit control function is in the hands of the experts
• Access professional advice and support for overdue accounts
• Straightforward escalation to formal debt collection services for aged or problematic accounts
• It can be far more cost-effective than conducting credit control in-house

Which businesses tend to outsource their credit control?

For the reasons covered above, almost any business that trades on credit terms may choose to outsource their credit control if they’d benefit from dedicated and professional resource and expertise, and to improve performance.

Yet there are certain types of companies which typically benefit even more so:

Companies with large or complex ledgers

For large businesses, keeping on top of the sales ledger at all times can be difficult and requires significant credit control resource. Even if you have an established team in place, that’s no guarantee that the function is as efficient and successful as it can be. And the resource needed to manage, motivate and provide support to a large in-house credit control team can be costly and time consuming.

So larger companies tend to benefit greatly from outsourcing this function, utilising the resource and expertise the credit control partner provides to improve performance whilst avoiding the need to recruit, train and retain employees, with the contract underpinned by a Service Level Agreement for additional peace of mind.

Smaller companies which lack the resource

Because small businesses typically see a modest number of staff juggling different tasks and working long hours, credit control can become one of those jobs which gets picked up ‘when we get a chance’.

Outsourcing the function not only provides the time to focus on other tasks and growing the business, it also means it’s given the focus that’s required to reduce late payment and improve performance.

Fast-growing companies

When businesses grow quickly, this can put strain on different departments and create cash flow challenges – particularly when trading on credit terms.

If you’re raising a lot of invoices and you don’t have the internal resource that’s required to keep up, credit control performance and cash flow can quickly deteriorate.

Rather than incurring the costs of recruiting in-house, credit control agencies can be extremely helpful for fast-growing companies, with resource able to be scaled up (or down) in line with the business’s requirements and invoicing patterns.

New businesses

Newly established businesses can also benefit greatly from outsourcing their credit control.

When you’re focused on getting your business off the ground, raising awareness and providing an exceptional service to your first customers, credit control can often get pushed down the list or fall to someone without the experience.

A credit control partner provides that resource and expertise you’ll need to ensure invoices are paid on time to keep cash flowing into the business. The key benefit for new businesses is that this outsourced resource can be scaled up to support your business as it grows.

How much does it cost to outsource credit control?

The short answer is not as much as you might think!

While it can vary between agencies, the price is commonly based on the number of debtors you have each month and the level of service you require. For example, whether you’re looking for support with accounts that reach a certain age or a service that commences as soon as an invoice is raised.

The key thing to consider is the value a partner can provide to your business and your reasons for looking to outsource:

1. Is it to improve DSO/debt turn, thereby bringing cash into the business faster to improve cash flow or take advantage of potential savings elsewhere, for instance on borrowing or by securing early settlement discounts with suppliers?
2. Is it to give your key staff more time to focus on and prioritise other areas of the company, such as securing new business?
3. Or is it to replace your existing credit control set-up, which will naturally reduce costs on the likes of salaries, recruitment and training?

The answer to this question will help you to calculate whether outsourcing is the most beneficial and cost-effective option for your business.

For a no obligations quote, please email collections@hiltonbaird.co.uk and we’ll provide an indication of the cost of outsourcing to your business.

How do I choose a suitable credit control agency?

Choosing a credit control agency isn’t just a question of cost. It’s also about their experience, the level of service they provide and their culture. Ultimately, the agency you choose will be representing your business and liaising with your valued clients, so it’s important to find one you can call your partner and someone you would happily refer to as an extension of your team.

A quick Google search will bring up a number of credit control agencies that specialise in supporting businesses like yours. So how can you identify which is the right one for your business?

Here are a few qualities to look out for:

1. Experience

How long has the business been operating and providing credit control services? Do they have particular experience in your sector? And is this experience backed up by success stories and testimonials from past and current clients?

2. Accreditations

Is the agency a member of the Credit Services Association (the trade association for debt collection) and authorised by the Financial Conduct Authority? Have they won any awards, for instance from the Chartered Institute of Credit Management (the world’s largest recognised professional body for the credit management industry)?

3. Professionalism

Do they have a credible looking website and a detailed explanation of their services and the types of businesses they work on behalf of? Do they have a case studies section? Are they on social media and is the output regular and professional? All of these things say a lot about a company and how they present themselves.

4. Reviews

As well as case studies and testimonials, do they have good reviews on third party review platforms, such as Google? Do you know anyone who has used a credit control agency in the past and would they recommend them?

5. Service

How much information do they provide about their service and any guarantees they can make to you? For instance, will the contract be underpinned by a Service Level Agreement? Are trial periods available? Is their service purely email and/or letter-based, or telephone too? And will their service be tailored to your requirements or is it a one-size-fits-all approach?

6. Operational ease

Is it easy to send sales ledger information to the agency? Is their service ‘confidential’, so customers see them as an extension of your business? Can they provide real-time updates and reporting?

How can Hilton-Baird Collection Services help?

We hope that the above information will help you to consider whether your business could benefit from outsourcing its credit control.

Whether you’ve decided to outsource your credit control or you’re interested in finding out more about what’s right for your business, we’d be delighted to speak to you and hear about your current challenges and/or requirements.

Established in 2001, Hilton-Baird Collection Services is an experienced, award-winning and family-owned credit control and debt collection agency.

Our focus is to help businesses of all sizes to get paid faster and improve their processes, providing a professional and quality service that adds value to our clients.

Specialists in recovering B2B debt, we’re trusted by businesses across a wide range of sectors and pride ourselves on our consultative, telephone-led approach to credit control that’s mindful of customer relationships.

Voted Third Party Debt Collection Team of the Year at the CICM British Credit Awards in both 2018 and 2019, we’re authorised and regulated by the FCA and members of the Credit Services Association.

To discuss your requirements and how we can help, call us on 0800 9774848, request a call back or email collections@hiltonbaird.co.uk.