Accounts Receivable Outsourcing: Why It's Beneficial for Your CPA Firm

In an ever-evolving accounting landscape, firms are working diligently to overcome the innumerable challenges that keep cropping up. However, out of these, keeping a seamless account receivable processes seems daunting since it is not only complex but also integral to maintaining the firm’s cash flow.

In addition to this, the myriads of other pertinent issues that range from invoice processing delays, and increased fraud risks to problems in cash flow management further pose a threat to a firm’s financial well-being that can neither be overlooked nor understated.

To deal with the issue at hand, accounts receivable outsourcing can turn out to be an enticing option for accounting firms. This is because it allows hassle-free accounts receivable operations along with the freedom to focus on one’s core operations.

Today, by entrusting this crucial aspect of accounting to the outside organization, firms cannot only gain insight into their financial operations but can even boost their cash flow management effectively without much ado.

1. What is Accounts Receivable Outsourcing?

Accounts receivable outsourcing is a process whereby a firm hires an outside organization to take care of its accounts receivable functionalities. The outsourced accounts receivable services can encompass tasks such as

• Payment tracking
• Invoicing
• Unpaid bill follow-up
• Billing system maintenance
• Managing cash applications

By outsourcing the complexities of the accounts receivable tasks mentioned, firms can save their invaluable time, reduce overhead costs, maintain customer satisfaction, and drive value for their businesses over time.

2. What are the Key AR Services that Can be Outsourced by CPA Firms?

CPA firms can outsource various AR services per their needs and objectives to streamline their processes and enhance business efficiency. In general, the outsourced team can offer both end-to-end AR services and tailored AR deliverables as needed by the firm.

The key AR outsourcing services that can be outsourced by the CPA firms are:

• Sales Invoice Generation
• Billing Services
• Collections and Dispute Management
• Cash Application Deliverable
• Maintenance of Customer Ledger
• Analysis of Customer Profitability
• Credit and Deductions Management
• Dispute Resolution
• Order Processing

3. When Outsourcing Account Receivable is the Right Option?

Mentioned below are a few indicators that suggest CPA firms when to outsource accounts receivable services:

1. Budget Constraints

If your business is tight on the budget and you find it hard to maintain an in-house team that can help you with the AR functions, then outsourcing these needs is the best option for you. This will save you from the overhead costs of keeping full-time employees.

2. Hiring Qualified Resources

It might happen that your CPA firm lacks resources that can effectively manage the AR needs of your end clients. In moments like these, you should think of outsourcing AR services since it will allow you to leverage the expertise of the outsourced team that can add to your business efficiency.

3. Growing Complexity

As businesses thrive, the AR functions can turn out to be more complex. If this complexity is hard to deal with by the in-house team, then you must outsource these services. This will help you navigate the challenges of the AR arena with ease while remaining compliant with the regulatory standards.

4. Constant Inaccuracies

AR services require accuracy and diligence that ensures none of your client’s records are missing or inaccurately recorded. As such, if you notice that your in-house team is frequently making mistakes in AR tasks, outsourcing is what you should go for without a second thought.

5. Inadequate Focus on Core Competencies

If you find your team muddled and soaked in performing repetitive AR tasks instead of focusing on core competencies, outsourcing might be what your firm needs. Accounts receivable outsourcing companies will not just handle the complexities of AR but will also free up your time whereby your team can focus on essential areas that require consistent tracking.

6. Risk Enhancement

Doing the AR services in-house is good if you do not have to worry about the risks associated with bad debt or credit management. However, if you are constantly in split minds regarding the impending risks, then outsourcing AR functions is advisable. This will help your firm leverage the expertise of the outsourced team who are often adept in keeping a check on the AR risks closely.

4. Benefits of Accounts Receivable Outsourcing

Virtual accounts receivable outsourcing offers a plethora of competitive advantages which are as follows:

1. Promotes Cost-Efficiency

One of the major benefits of accounts receivable outsourcing is that it can help you save a considerable amount of money. According to a report by STAMOD outsourcing can help reduce operational costs of a firm up to 40%

Although, the savings depend on how much of the services you are outsourcing and other changes that your firm is applying in-house, it is still a huge amount that cannot be understated or overlooked.

This reduction in cost happens because you do not have to maintain an in-house team which takes up a lot of your firm’s money in the form of salaries, and benefits along with training requirements. This can help the CPA firm save on monetary resources that can be utilized in other key areas for enhancing business processes.

2. Enhances Business Efficiency

When you outsource your AR needs, you come across streamlined processes that thrive on advanced technologies. This can help you have accurate and faster AR solutions that are in line with your end-client needs, thus enhancing your business efficiency.

3. Allows Better Focus on Core Business Needs

When you outsource your AR services, your internal team can get more time to focus on other business avenues such as marketing, sales, or product development which can help boost your CPA firm’s profitability.

However, how much time you will have in hand will depend upon the extent of services you have outsourced. The general rule of thumb is that the more AR service you outsource, the more time you will gain that can be dedicated to other important areas that need attention.

4. Improves Cash Flow Management

Maintaining efficient cash flow is one of the core needs for any business. By outsourcing the AR needs, firms can manage their cash flow effectively while expediting the process, which further adds to the financial flexibility of the firm.

The outsourced service providers use automated invoicing process and accounts reconciliation apart from financial management such as payroll allocations, cash flow forecasting, and transaction automation that help improve cash flow of the firm.

5. Offers Scalability

The best thing about accounts receivable outsourcing is that it allows you to scale up or down the services per your current needs without having to look into your pockets now and then.

6. Ensures Regulatory Compliance

The outsourced AR team is usually well-versed with the regulatory changes at hand. Therefore, when you outsource the services, it allows you to remain compliant with the dynamic laws, which will help you avoid any legal pitfalls.

7. Grants Competitive Advantage

When you outsource your AR needs, you get access to experienced professionals who can handle the complexities of the industry seamlessly. This helps improve the firm’s service offerings, quality as well as operational speed which gives a competitive edge in the complex accounting realm.

5. What are Differences Between In-house Accounts Receivable and Outsourced Accounts Receivable?

Both in-house and outsourced accounts receivable teams possess distinct approaches when it comes to managing AR tasks such as invoicing, billing, or reconciliation work.

The differences between both the teams are as follows:

1. Control and Ownership

When it comes to the in-house team, the CPA firm has complete ownership and control of the AR processes which also involve decision-making, strategy formulation, and implementation. On the other hand, when the AR tasks are outsourced, although the firm still retains the ownership, it extends everyday control to the outsourced service provider.

2. Scalability and Flexibility

When the AR functions are managed internally by the firm, it can affect the scalability especially when the workload increases. However, the outsourced service provider extends flexibility and scalability to the CPA firms no matter the workload. This allows firms to scale up or down the requirements as the situation demands.

3. Regulatory Compliance

Since the outsourced firm work with varied clients and have more industry exposure, they are better aware of the recent updates in laws and any changes in regulatory parameters compared to the in-house team. They can thus help you stay compliant, reducing the chances of legal troubles.

6. Things to Take Care While Choosing Accounts Receivable Outsourcing Services

To enjoy seamless accounts receivable outsourcing services, you must keep certain key points in mind while choosing your service providers. These are as follows:

1. Reputation and Reviews

Checking reputation and reviews is important criteria to consider before outsourcing the AR needs of your firm. To do this, you can visit various portals such as Clutch, Good Firms, or UpFirms to find out about the reliability of your prospective outsourced team.

Also, refer to their previous clients and see what reputation the prospective outsourced team has, which is essential to know their standing in the industry.

2. Experience, Qualifications, and Expertise

Evaluating the experience, qualifications, and expertise of accounts receivable outsourcing services is paramount to ensure you get the desired service provider at your disposal. For this, you can check their LinkedIn profile apart from reviewing their credentials and certifications. Also, request for work portfolio to evaluate their core expertise.

In addition, check their technological capabilities so that your AR processes can be carried out seamlessly.  This can be done by asking for their team’s qualifications who would be working on your AR tasks and by seeking information on their programming frameworks, and tools used by them.

3. Data Security Measures

Choosing someone who is not invested in protecting the crucial data of your clients is never worth your time and effort. With the advancement in technology, the risk of misuse of crucial data is on the rise, which can severely affect your clients and your reputation at large.

Therefore, when you are planning to outsource your AR needs, ensure that the outsourced team has stringent security measures at their disposal so that sensitive data can be safeguarded against misuse.

Check whether the outsourced team is GDPR compliant, and ISO 27001 certified as these indicate that the firm adheres to the set data protection principles, a mandatary parameter for information protection.

4. Technology Usage

Outdated and regressive technologies can hamper your AR work and slow down the entire process. Infact, according to new research mentioned by Insight, outdated technology uses up to 46 minutes of an average employee working time, which is huge.

As such, when you outsource, you must ensure that the technology utilized by the outsourced team is updated and the tools utilized have an in-built automation system that can add to your business efficiency.

5. Tailored Services

When you outsource accounts receivable services, ensure that the service providers are flexible and can customize the services per your needs. This will help you in achieving sustained growth that does not diminish over time.

6. Communication Mediums

Open and consistent communication is the cornerstone of successful outsourcing services. Therefore, when you plan to outsource, check the mediums that the outsourced service provider uses to communicate with their clients so that they can solve the queries promptly.

Check if the use emails, Slack, Zoom or Clickup to interact apart from any other mediums that can help you reach out to the outsourced team quickly without hassles.

7. Scalability Options

Another aspect to take care of while outsourcing the AR needs is to see whether the outsourced service provider can provide you scalability based on your varied requirements without compromising the efficiency of the deliverable.

7. What is the Process of Outsourcing Accounts Receivable?

Accounts receivable outsourcing services usually encompass the following processes as followed by CPA firms:

1. Planning

To begin with, when your CPA firm thinks about outsourcing the AR needs, you must assess and plan your current needs with which you need assistance. Also, you must prepare an outline that clearly sets your goals in front of the service provider.

2. Selection

The next step in the process of outsourcing your AR services includes choosing the right service provider. Check the qualifications, industry, and niche experience including their reputation across the accounting realm.

3. Negotiation

At this stage, go through the terms of services, including service level agreements, their pricing format, and other intricacies before outsourcing the services.

4. Transition

Once you have selected the virtual accounts receivable outsourcing services, work on the transition plan to seamlessly transfer the impending responsibilities. You must also see that you are providing access to the outsourced team to essential data and required systems. Also, choose the communication channels to communicate with them effectively.

5. Periodic Review

Lastly, make sure that after you outsource the AR services, you are keeping track of the work done and checking if the outsourced team can align with your intended goals.

8. What are the best Practices for Outsourced Accounts Receivable Management?

Freeing up your firm’s invaluable resources from tedious AR tasks is good if you understand the best practices for outsourced accounts receivable management.

This is how you can go about it:

1. Select the Right Partner

Not all service providers can understand you and your needs. Therefore, choosing the right partner who has your niche experience and expertise is extremely essential. This will help you experience significant growth in your endeavors since the ideal outsourced team will be invested in your success and will align with your goals effectively.

2. Keep Clear Expectations

When you outsource accounts receivable services, make sure that you keep clear expectations with your service providers. This also includes telling them what you expect from them so that you can remove the possibility of any misunderstanding or miscommunication in the future.

3. Communicate Effectively

As much as it is important for you to expect the service provider to keep effective communication with you, it is your responsibility too to communicate properly with them. This also involves telling them about any changes in your business needs at the behest to avoid last-minute hassles.

4. Discuss About the Pricing Structure

Discussing openly regarding the pricing structure at the behest is one of the best practices that you can employ while outsourcing AR services. This will help you ascertain your budget and choose the service provider who is the right fit for your firm.

5. Choose Quality Over Price

Although cost is one of the major criteria that determines who you will outsource your AR services to, it is always advisable to give priority to the quality of the services offered rather than the prices.

After all, you would not want to compromise your services by outsourcing the task to someone who, though maybe charging less, does not have a great track record in the industry.

Would You?

Therefore, always outsource the services to a reputable name, the one that can offer quality services that boost your success rather than pull you down!

Conclusion

Accounts receivable tasks are one of the most pertinent aspects of any firm. Carrying out each of these essentials of AR is crucial for the smooth running of businesses. By taking the help of accounts receivable outsourcing service providers, CPA firms cannot just streamline their AR operations but can even give a boost to their bottom line while focusing on other core competencies.

With the right partner by your side, your CPA firm can withstand the challenges of the AR realm and revel in the transformative power of the outsourced service provider that accelerates business growth in time.

9. Frequently Asked Questions

1. What are the services that outsourced accounts receivable service providers offer to the CPA firms?

Ans- Some of the services that come under outsourced accounts receivable are as follows:

• Sales Invoice Generation
• Billing Services
• Collections and Dispute Management
• Cash Application Deliverable
• Maintenance of Customer Ledger
• Analysis of Customer Profitability
• Credit and Deductions Management
• Order Processing

2. What are some of the ways by which outsourcing accounts receivable tasks affects data security and compliance?

Ans- Outsourcing the accounts receivable tasks affects the data security and compliance criterion of a CPA firm positively. Since the outsourced service providers use stringent measures to safeguard crucial client data, the protection of information is maintained at all levels.

Also, with the outsourced team being experienced and adept in the regulatory parameters, compliance with the dynamic regulatory measures is maintained, which helps avoid legal pitfalls.

3. What are the types of pricing models for outsourced accounts receivable services?

Ans- Although there are several types of pricing models available for outsourced accounts receivable services, some of the common ones are: –

1. Staffing Model

This includes hiring an outsourced team to work on a given task for a specific period.

2. Dedicated Model

Although similar to the staffing model, the dedicated model also includes working with an external service provider/ expert for the project.

3. Flat-Fee Pricing Model

Here, the service provider can charge a fixed amount (monthly or yearly), for the services offered irrespective of the complexity or volume of the transaction that occurs.

4. Transaction-Based Model

In this, the outsourced service provider charges a certain amount from the CPA firm for each of the transactions that get processed. This price can vary based on the complexity of the task.

5. Customized Pricing

In customized pricing model, the outsourced service provider can charge the amount depending on the requirements of the clients and the tailored services offered. This can vary across their clientele.

4. How much will be my involvement in the outsourced accounts receivable process?

Ans- The involvement of your CPA firm after you have outsourced your AR needs will depend on whether you have chosen to outsource all your AR tasks or partial ones. It will also be dependent on whether you are following a collaborative approach or tailored services.

5. How does outsourcing accounts receivable affect customer relationships and satisfaction?

Ans- Accounts receivable outsourcing can positively affect customer relationships and satisfaction depending upon the implementation methodologies.

Some of its positive effects are:

1. Enhances Efficiency

When you outsource accounts receivable services to a third party, it leads to streamlined operations and faster task completion that help boost business efficiency, thus boosting client relationships.

2. Better Scalability

Outsourcing AR services enables CPA firms to scale up the services as required. This ensures that the end clients receive timely assistance and AR solutions that lead to satisfaction.

3. Access to Experts

Accounts receivable outsourcing enables CPA firms to gain access to experienced professionals who are experts in carrying out the tasks of AR no matter its complexities. This boosts client trust in the organization, leading to satisfaction and long-term collaboration.

6. What steps should I take to get ready to outsource the accounts receivable services to the third party?

Ans- The steps to outsource your CPA firm’s accounts receivable services are as follows:

1. Planning

Begin by planning what services you want to outsource and create a map outlining your goals for the service provider.

2. Selection

Next, choose the outsourced service provider who is the right fit for your CPA firm. Get clarity regarding their qualifications, industry experience, and niche knowledge apart from their reputation in the accounting arena.

3. Negotiation

Check the service terms, pricing model, and other intricate details before outsourcing to the prospective service provider.

4. Transition

After selecting the service provider, focus on making a seamless transition plan to transfer the responsibilities to the outsourced AR team. Also, help by furnishing them with the required system and data and choosing the communication channel that works well for both sides.

5. Periodic Review

Finally, after outsourcing, keep track of the work being done and whether they are able to match your desired goals.

7. Is there any impact on internal resources if accounts receivable services are outsourced?

Ans- When the AR tasks are outsourced, it can lead to varied impacts on the firm’s internal resources. Some of the ways that it can affect are:

1. Lesser Workload

When AR services such as invoicing or reconciliation are outsourced, it allows CPA firms to free up their internal resources. This enables the in-house team to focus on other core competencies which can enhance productivity and eventually lead to business efficiency.

2. Cost-Effectiveness

Hiring an outsourced AR team can significantly lessen the operational costs of the firm as it removes the need to maintain the in-house team. With no in-house team, the firm can save a huge amount of money that otherwise goes into giving salaries, benefits, and other rewards to the employees, including training.

3. Streamlined AR Processes

An outsourced AR team enables CPA firms to streamline their AR processes and help optimize AR tasks. This leads to faster work completion and smoother operations.

4. Better Insight

The accounts receivable outsourcing team consists of industry experts and professionals who are proficient in their work. This aids CPA firms to leverage the expertise of the outsourced team which can lead to better accuracy while improving business efficiency.

8. Do I have to keep any legal or regulatory parameters in mind when outsourcing accounts receivable tasks?

Ans- Yes, certain legal and regulatory considerations should be kept in mind when outsourcing accounts receivable services:

1. Privacy and Data Protection Laws

Based on the jurisdiction of your CPA firm and outsourced AR team, you must ensure that you both are compliant with privacy laws and data protection policies. Also, ensure that the outsourced team keeps proper security measures to safeguard the data at hand.

2. Contractual Agreement

While outsourcing the AR services, ensure that you keep a comprehensive contractual agreement that defines the scope of work, responsibilities, termination criteria, and data protection measures. You should also get a legal review of the contractual agreement to ensure you are compliant with the related rules and regulations.

3. Confidentiality and Non-Disclosure Agreement

Outsourcing AR services calls for crucial data sharing that must be protected. Therefore, CPA firms should have a fully functional confidentiality and non-disclosure agreement in place that helps protect sensitive data from misuse or unauthorized access.

4. Cross Border Deliberation

If you are outsourcing the AR needs to the service provider residing in another country, then you must take note of the cross-border legal considerations to avoid legal pitfalls.

9. Can my existing accounting or ERP systems seamlessly integrate with outsourced accounts receivable services?

Ans- Yes, often the outsourced AR services can integrate with your existing accounting or ERP system without hassles with the aid of API integration, data mapping, and certain web-based platforms.

However, before outsourcing the AR services, it is advisable that you inquire about the integration capacities of the outsourced service provider.