Due to this, many companies lack back offices or the developed technology that can be used for payment and financing transactions. When this equipment is lacking, some companies will outsource and have specialists complete these payment processes for them while others may have their employees trained to tackle the task themselves. In both cases, companies must weigh the benefits and drawbacks of each option and decide which route, In-House vs Outsourcing, will best aid the success of their business. Let’s explore the costs and benefits of each approach for Accounts Receivable Management.
In-House Accounts Receivable Management
In-house development means that a team of employees trains and works together for the purpose of completing a specialized task for the business. Construction manufacturers, dealers, and distributors will train their employees to be able to use accounting and account management software. This in-house need must have the skills that are necessary to fully tackle qualifying a trade customer for net terms, creating invoices, managing payment, and dealing with late and unpaid invoices.
However, there are challenges associated with this process:
- Additional Expenses: Establishing an internal team to work on offering customer financing has associated costs that can significantly diminish the resulting profit. Companies often neglect the fees, expenses, and training that is required to hire an internal team. Supplemental to this, companies must pay for all the expenses taken on by this team, and the cost of managing and acquiring training materials can add up quickly.
- Lack of Expertise: Using an in-house team may hinder the capacity of expertise on a job. For instance, while training employees may allow you to quickly assemble workers for a project, the level of expertise and speed of completion may be better maximized with individuals who specialize in that particular facet of development. Especially when considering lending and qualifying customers, this small in-house team has to keep up with fluctuations in the market and address all possible risk.
- Taking the Risk: Gathering an in-house team forces businesses to take on a significant amount of risk when dealing with accounts receivable management. These businesses that use in-house teams run the risk of unpaid invoices and delinquency on their own.
Despite these potential drawbacks, in-house accounts receivable management also presents companies with considerable benefits:
- Full Oversight of Projects: Assembling a team in-house allows companies to maintain complete control Changes or adjustments in the direction of the project can be made directly based on what makes sense, as a result.
- Consumer-specific Development: In-house teams will best understand the target market and industry that their company’s project is addressing. Having dealt with their customers and worked in their industry, getting down the specifications, both small and large, will not be a challenge for an in-house team.
Outsourced Accounts Receivable Management
Outsourced development entails hiring a third party to handle a specific project that a business needs to complete. This means that a business relies upon the expertise and skills of a company specializing in managing accounts receivables to simplify its bills, payments, and invoices.
Here are the potential benefits of outsourcing:
- Industry Experts: Outsourced development is usually executed by seeking out experts in managing the risk of financing, qualifying customers for financing. By doing so, businesses can ensure that their needs are best met by those who specialize in the work the business needs to be completed. Outsourcing work means that a building material supplier can often avoid delays or tedious issues that they may face when using an in-house team.
- New Perspective: An in-house team is equipped with a concept of the needs and wants of their consumers within their business’ industry. However, outsourcing allows businesses to gain a fresh perspective on their project and receive feedback that they might not have received otherwise. It will allow the construction businesses to adjust based on what customers demand. An example of this is a trend toward digitalization as a result of COVID: businesses have seen that adapting to an easy-to-use technology will help to keep up with the changing industry.
- Cost-Effective: Outsourcing will help businesses avoid the accounts receivable management costs mentioned before. They don’t have to train employees, pay for additional software with a high learning curve, or deal with the cost associated with invoice collection and delinquent payments. This will also lower the risk, as businesses no longer have to deal with any unexpected or associated costs that stem from in-house teams.
- Extended Working Capital: When businesses assemble in-house teams, they must allocate capital towards training and expenses associated with accounts receivable management. However, outsourcing enables businesses to have more working capital to expand on other crucial parts of their business, such as marketing.
Although Outsourcing presents a significant benefit to businesses, it has its own drawbacks, as well:
- Lack of Control: Turning to a third party takes the control and security of a project away from the business and hands it over to the third party. Thus, the fundamental responsibility now lies with the third party rather than the business itself.
Both In-House and Outsourced developments can aid businesses in undertaking and completing projects. In all, deciding which option is not only more cost-effective but also most efficient is an important deciding factor.
BlueTape is designed by a team of construction pros that understand the construction industry for the construction industry. Want to learn how BlueTape can help you offer extended net terms to your trade customers and automate your accounts receivable management? Talk to our sales team for more information.
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