Outsourcing Credit Control


February 18, 2015

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Cash is the oxygen that businesses require and without it they collapse into insolvency. Healthy cash flow is essential if businesses are to survive and indeed thrive. It’s therefore vital to keep a tight rein on cash flow, make sure you can pay – and be paid – on time.
Most entrepreneurs have built and developed businesses because of specific skills or visions and many will have developed good internal systems and controls to make sure they are paid on time. Whether the business is growing or mature, there are many reasons to consider outsourcing your credit control or collections function and many benefits. Essentially, the business will then be able to devote 100% of its valuable time on the areas at which it excels, whether that is customer service, winning new business, product innovation or marketing.

Outsourcing doesn’t mean losing control
Outsourcing is a very efficient and cost effective way to grow your business. It enables businesses of all types and sizes to employ the highly skilled resources and manpower that would normally only be available to large organisations.

Good credit management and control systems are expensive to implement and require good procedures. The belief that anyone in an organisation can effectively chase money is a costly mistake, as efficient cash flow, liquidity and protection from bad debt is critical to every business.
Businesses are at risk from the threat posed by late and non-paying customers, yet this key function is often left in the hands of part time workers or poorly trained staff. Sometimes, the business owner is left with managing this task, when they could be doing something more productive. During periods of absence, this crucial role is left vacant and the risk to the business is increased. As the cash cycle starts to slow, the risk to the business increases.
We enable businesses of all sizes to employ the highly skilled resources and manpower normally the preserve of very large organisations.
Pulse is the acknowledged expert in outsourced credit control services. We will generate regular cash from your business.

Benefits of outsourcing:

  • Improves quality of service
  • Increases productivity
  • Makes the business appear more professional
  • Improves cash cycle
  • Reduced overdue debt equals reduced bad debt write offs
  • Provides access to highly skilled, experienced people
  • Provides access to advanced credit control technology
  • Saves money 
  • Frees up valuable time 
  • No personnel issues to manage
  • Less downtime for sickness and holidays
  • No training or recruitment issues to hamper the business

What are the Savings: 
What does successful credit control mean in cash terms? We took a random sample of three clients from our portfolio; one was a company whose ledger really did need some work when it was taken over, but the results are dramatic. Another was really in good shape, with good systems but without a team 100% dedicated to the job and the third was somewhere in between, they need a more systematic chasing programme.

The first turns over £1 million. Average debt turn at take on was 73 days. A year later it was down to 40 days, an incredible 45% improvement releasing £67,000 of working capital back into the business. That’s 34% reduction in borrowing and borrowing costs, or an investment in business growth yielding far greater margins. In borrowing costs alone this contributed £8,000 per annum to the bottom line. Added to that the staff costs in outsourcing then the savings start to escalate.

The second turns over £20 million; on the face of it a modest improvement of 5% reducing debt turn from 56 to 53 days. Not earth shattering but for this business it released £140,000 cash back into working capital and an interest saving alone of over £1,000 per month. Of course it’s not just the interest saving, but what that cash can earn for the business.

The third turns over £5.5 million and average debt turn reduced from 41 days to 34 days (17%) over the year, releasing £128,000 back to working capital.
So, how ever well your controls are, there is always room for improvement, so it is always worth looking into the option of outsourcing credit control; it could have a very positive effect on the bottom line. Speak to us and see how we can help your business.

Take control of your cashflow today!

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