What is accounts receivable outsourcing
Accounts receivable outsourcing is the process of hiring an external firm or individual to handle a company’s accounts receivable functions. Accounts receivable, also known as “AR,” refers to the money a company is owed by its customers for goods and services provided on credit. Outsourcing AR functions can be a cost-effective and efficient way for companies to manage their finances and improve their cash flow.
When a company outsources its AR functions, the outsourcing vendor takes on the responsibility of managing the company’s accounts receivable process. This includes tasks such as recording, verifying, and collecting payments from customers, as well as preparing and reporting on financial statements. The client and outsourcing vendor coordinate to ensure that all AR functions are handled in an efficient and timely manner.
The process of outsourcing AR functions typically begins with the client providing the vendor with access to their financial records and systems. This includes providing the vendor with access to accounting software and other financial tools, such as invoicing and payment systems. The vendor then uses this information to record, verify, and collect payments from customers, as well as prepare and report on financial statements.
The vendor also uses specialized accounting software to process the AR functions. These software can include accounting software like QuickBooks, Xero, and SAP, as well as AR automation software, like Bill.com and Zoho Books, which streamlines the invoice generation, payments and collections process.
The client is responsible for providing the vendor with all necessary information and documentation, including invoices, sales orders, and other financial records. The vendor then uses this information to record and verify invoices, as well as prepare and report on financial statements. The client also has access to their financial records and can review them at any time.
Benefits of accounts receivable outsourcing includes cost savings, access to specialized expertise, increased efficiency, and improved cash flow. Outsourcing the AR functions allows companies to focus on their core business operations, while the vendor takes care of the financial aspects of the business. Additionally, the vendor’s specialized expertise and use of specialized software can lead to more efficient and accurate processing of financial transactions, resulting in improved cash flow for the company.
In summary, accounts receivable outsourcing is the process of hiring an external firm or individual to handle a company’s accounts receivable functions. It can be a cost-effective and efficient way for companies to manage their finances and improve their cash flow. The client and outsourcing vendor coordinate to ensure that all AR functions are handled in an efficient and timely manner. Specialized accounting software is used to process the AR functions, which streamlines the process of invoice generation, payments and collections. Outsourcing AR functions can lead to cost savings, access to specialized expertise, increased efficiency, and improved cash flow for the company.
