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In-house vs Outsourced AR Processing

Updated on :  

08 min read.

Many organisations experience the inadequacy of back offices and relevant technologies required for payment and financing transactions. While some organisations outsource their payment processes to specialists, others hire and train employees to perform these tasks themselves. To select the best-suited method for themselves, organisations must understand and weigh the pros and cons of both in-house and outsourced AR (accounts receivable) processing.

What is In-house AR Processing?

In-house AR processing involves the hiring and training employees for performing specialised payment-related operations for an organisation. The employees are thoroughly trained in using accounting and account management software. They are required to have the necessary skills to create invoices, qualify a trade customer for net terms, deal with delayed and unpaid invoices, and manage payments.

What is Outsourced AR Processing?

Outsourced AR processing involves hiring third parties for managing the payment processes of an organisation. The organisation depends upon the experience and skills of the third party specialising in streamlining bills, payments, and invoices by managing accounts receivables.

Pros and Cons of In-house and Outsourced AR Processing

In-house AR Processing

Pros:

  • Direct and complete oversight of projects – Hiring an in-house team enables organisations to have direct control over the projects. This helps make quick adjustments in the direction of the projects as and when required.
  • Customer-specific developments – In-house teams will better understand the target market and industry of the organisation as they have already dealt with their customers and worked in the target industry in the past. This will help in streamlining the process of defining the specifications.

Cons:

  • Additional Costs – The cost of setting up an internal team for handling customer financing can often surpass the resulting profit. Organisations must consider the fees, expenses, and training required for hiring an in-house team. In addition to this, the organisation will also have to pay for all the expenses undertaken by this team and the costs required for obtaining and managing training materials.
  • Lack of expertise – An in-house team might hinder the speed of completion of a task due to its lack of expertise. They might not be able to maximise the process like specialists in that field do it. Their incapability of keeping up with the fluctuations in the market and addressing potential risks might affect the organisation.
  •  Risky – Setting an in-house team puts an organisation at the risk of unpaid invoices and internal delinquencies.

Outsourced AR Processing

Pros:

  • Industry experts – Outsourcing AR processing enables the organisation to ensure that the financial transactions are being carried out by specialists with years of relevant industry expertise.
  • New insights – An in-house team is often equipped with a concept of customers’ needs within their organisation’s industry. Outsourcing, on the contrary, offers fresh insights and acquires relevant feedback that can help the organisation serve its customers better.
  • Reduced costs – Outsourcing allows organisations to cut the expenses required in hiring, training, and managing employees, setting up additional software, and managing internal invoice payment issues and delinquencies.

Cons:

  • Lack of control – Unlike in-house AR processing, outsourcing does not offer direct control over the process. This means that any changes or adjustments required in the direction of projects might be delayed.
  • Dependency – Outsourcing AR processing results in the complete dependence of organisations on third-party companies for operating vital functions. Any issues such as bankruptcy, security breach, etc., happening with them will directly affect the organisation’s AR process.

How Can ClearOne Help?

ClearOne uses modern and updated technology to streamline accounts receivable processes of organisations. It enables organisations to record and settle multiple invoices. Organisations can send payment reminders to customers, monitor receivables at either the invoice or customer level, and instantly mark receivables as paid for further convenience.