Cash flow makes or breaks a small business, but managing your payables and receivables in-house can take a lot of time and effort as you grow. That’s why so many small businesses want to outsource their working capital management - but what are the pros and cons?
At CSI Accounting & Payroll, we’ve worked with small business finances for over 50 years. Thousands of small businesses have outsourced their financial needs to us, but we don’t handle their accounts payable (bill pay) or accounts receivable (collections).
Why is that? Here, we break down:
- What it’s like to outsource A/P and A/R
- The pros of outsourcing A/P and A/R
- The cons of outsourcing A/P and A/R
What It’s Like to Outsource A/P & A/R
Accounts Payable
A/P isn’t an intimate service like A/R is, but it can still have cash flow issues.
Most small businesses struggle with their A/P. They need to know how much money is coming in to know how much of their bills they can pay at the time without facing overdraft fees.
Some businesses find outsourced A/P services to be worth it, especially when it comes to saving time. They rely on a service to pay their bills - often without considering how much money is coming in.
However, many A/P services want to pay bills by the due date. Due dates don’t mean as much in the business world as they do in your personal life. In the business world, there typically aren’t late fees. Instead, your suppliers may just hold onto new products for you until you pay.
Accounts Receivable
Meanwhile, A/R is an extremely intimate service. Collections are how your business gets its money. We firmly believe that outsourcing A/R has far more cons than pros.
When you work with an A/R service, you still have to do all of the work to make your invoice since each invoice is unique and this process doesn’t have scalability.
A/R services also largely just send the invoices out, and some don’t even collect the money for you. The services that do try to collect don’t have any guarantees in place that they can actually get you the money.
If A/R services can’t collect on the invoice, you risk going out of business, but it’s not the end of the road for them. This is critical to you, but they don’t have the same personal attachment to the work they perform (or can’t perform).
Pros of Outsourcing A/P & A/R
Overall, the pros of outsourcing payables and receivables don’t vary much from the generic pros of outsourcing anything.
It’s more cost-effective to outsource than to hire in-house staff, and outsourced services often have specialized knowledge in that field to minimize risk.
This also means that you can focus on your area of expertise: your business. When you put your time into growing or improving your business, your time is the most valuable. Really, this is the whole point of outsourcing anything!
When you outsource to A/P and A/R experts, you typically save time and money if the service successfully obtains your due money and pays your bills at the right time. However, you miss out on some benefits if you face certain obstacles. Let’s dive into the cons of outsourcing next.
Cons of Outsourcing A/P & A/R
CSI Accounting & Payroll offers many small business services, but we don’t handle bill pay or collections.
This is for a couple of reasons. As a fellow small business that does not specialize in these services, we don’t have the manpower required to do them. Invoicing also can’t be standardized, so it would take up time that we can’t take away from our accounting and payroll clients.
However, we’ll show you how to do bill pay with our system, as well as show you how to use our software to invoice and collect payments.
We don’t want you to face any challenges related to a loss of control over your cash flow or a lack of customization - and while this is not an issue with CSI, many other services can present issues with communication, making typical cons of outsourcing even worse.
Keep Your A/P & A/R In-House but Outsource the Rest!
Now that you know about what it’s like to outsource payables and receivables, plus the pros and cons of outsourcing in general, are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! While we don’t handle your A/P or A/R fully, we advise our clients on how to do bill pay with our system, as well as how to use our software to invoice and collect payments. As you just read, we have good reasons to leave this critical part of your business up to you.
To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what it’s like to work with CSI by clicking the image below:
