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11/28/2018

How Outsourcing Accounts Receivable May Help Reduce Costs for CES Vendors

Insights

Today's consumer technology business is more competitive than ever. Product vendors in particular are faced with keeping up with consumer buying preferences, new product categories, changing technologies and most importantly, trying to grow profits in the face of shrinking margins.

Many businesses attempting to reduce costs seek out a financial services organization like CIT for a professional alternative to managing accounts receivable (AR). Working with CIT may also provide businesses with the cash flow they need to maximize their potential.

We’ve seen firsthand how important it is to have adequate cash flow for a business to operate. Why would a company continue to put profits into building their own AR operation? Instead, it may want to start asking the following questions.

What is the best way to maximize best practices for the credit/collection functions of my business? 

Companies today need to be extremely nimble. They should aim to be aggressive while extending credit, yet try to avoid any potential bad debts. A professional approach to building your credit collection department is crucial to this task. The battle between sales/marketing and credit exists in most companies.

While your instinct may be to keep receivables management in-house, smart executives today explore outsourcing these functions as a way to avail themselves of state of the art systems and experienced staff while controlling expenses. In doing so, a fixed percentage is assigned to the cost of the credit and collection process, which eliminates the daily burden of these functions as well as the cost associated with AR administration.

Just as a payroll company can often better manage payroll, a firm that specializes in managing credit/collections and AR can often perform these functions better than any in-house operation. Not only is an outsourced AR management company familiar with most accounting systems and payment methods, but it also has existing relationships with most retailers which can help speed up the collection process. A firm like CIT also provides “credit protection” against approved AR. This is an alternative to credit insurance, which normally provides 100 percent coverage with no deductible or co-pay in the event of insolvency.

How does outsourcing your credit/collections and operations work?

CIT has a team of seasoned credit professionals based in Charlotte, along with a collections and administrative staff in Danville, Virginia to service your business. Our employees are dedicated professionals who are experienced in customer service. They are focused on developing and encouraging customer relationships using state of the art systems and best practices to provide a consistent approach to credit extension, collections and administration. 

Can you work with my bank?

Like every financial institution, CIT enjoys lending money to solid, growing companies but we can certainly work with your bank if you would like to have them manage your funding. We are able to provide credit/collections and AR functions while your bank handles the financing. 

What happens if you say no, you’re not taking the credit risk? Am I prevented from selling to the customer? 

No, you are not prevented from selling to the customer by CIT’s credit decision - the final decision to ship or not ship is always yours to make. Should you choose to still sell the retailer on credit terms, we will follow up with them for payment as we normally would with a customer we’ve taken the credit risk on. This receivable is however at your risk and would not be credit protected by CIT. 

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