AW Holding
Cost savings haven’t become the concern of the finance departments only, but it become a major goal across corporate teams starting from the owners & chairmen to the new recent juniors.
Even some of the most needed certificates for higher promotions and managerial roles in corporates like Six Sigma depend in the first place on learning how to reduce cost.
Outsourcing became the magic solution for this aspect, you can say goodbye to the overhead of maintaining an in-house accounts receivable department huge salary when you explore the saving options for accounts receivable outsourcing cost.
What is the Meaning of Outsourcing?
Outsourcing refers to the practice of delegating specific business functions or processes to external third-party providers rather than handling them in-house.
This can include tasks such as accounts receivable, customer service, IT support, manufacturing, and even content creation.
How much Accounts Receivable Outsourcing Cost?
There is no average cost for accounts receivable outsourcing services, just like any service provider the cost varies from one firm to another based any many factors, the quality of the services provided, what is associated or presented along with the collection such as the reporting and credit analysis, the industry you are operating at, the company size, receivable ages, and most important aspect is the size of receivable portfolio.
The Pricing Models for Accounts Receivable Outsourcing
There are different ways how accounts receivable outsourcing firms charge their clients such as:
1 – Percentage:
It is the common pricing model based on a percentage of the collected amount from those receivables, it is like the debt collection agencies when they charge a percentage amount from the collected debt, also the accounts receivable outsourcing firms tends to work with the same model and treat the receivables just like the debts.
2 – Fixed Monthly Fees:
A basic flat fee to be paid monthly is identified based on the number or amount of opened accounts the outsourcing firm operates with.
The fees could be changed from one month to another due to the ageing of receivables and the number of successfully closed accounts or new accounts onboarded by the client.
3 – Fixed Annual Fees:
A basic flat fee but this time to be paid for the whole year (contract) whether as onetime payment or by installments or in batches, this option tends to be one of the lowest cost models but it is a risky one, because you pay someone you haven’t been established a trusted and solid relationship with him and even evaluated his quality of services and deliverables on the needed amount of time.
4 – Part as Fixed Amount and the other Part based on Target:
It’s a mix between the first and second pricing model by dividing your payment model to multiple or different parts as paying a fixed amount on monthly basis and the rest of the package to be paid as a percentage based on the achieved target of collection.
This is the most adorable model for the corporates due to the flexibility in payments especially the percentage that is attached and mortgaged at a certain rate of collection.
It also provides a trust approach for the clients about the hired outsourcing firms, knowing that they will be encouraged to work at their best level as they won’t get paid in full unless they collect the agreed targets that profit the client to pay them.
Different Accounts Receivable Outsourcing Work Models:
The work model is a strong factor for pricing the services of the accounts receivable outsourcing firms, just like any other normal business you measure the cost with price to know when you will generate revenue and breakeven, here the most know working models for accounts receivable:
1 – Software Solutions:
Developing and enhancing the software is the major pricing factor for these companies, of course it costs them a lot of money building the software and application, but then they spend normally on maintenance.
You subscribe to their software and app to be licensed to use it for managing your collections, following up, generating reports and helping you with data analysis, usually you as client do this on your own, as the software automate the tasks.
2 – On Ground Solution:
With this solution the outsourcing firms steps in with an on-ground collection team and field visitors to handle your accounts receivable collection activities or work with your current one, all the tasks delivered here in a handmade way.
We can’t say it’s less effective than software solutions as some clients prefer human interaction depending on their portfolio, the industry they collect from and background of customers and region they deal with.
3 – Purchasing Solution:
A different approach for profiting from accounts receivable is by purchasing the AR accounts from the clients and collecting them for themselves, and this is what is called a factoring process and usually done by factoring companies not outsourcing ones.
What are the benefits of account receivable outsource?
Outsourcing can offer many benefits for businesses and individuals, such as cost savings, access to expertise, increased focus on core activities, scalability, risk management and 24/7 Operations.
How AW Qatar Pricing Packages Works:
Our AW Qatar Pricing Packages are designed to be flexible and tailored to your specific needs. Whether you prefer a monthly subscription or an upfront payment, we offer options to suit your preferences.
Our target-based commission structure or percentage-based pricing means you only pay for the results we deliver. And you can be confident you’re getting a competitive rate in the market.
We deal with accounts receivable outsourcing cost as an investment for our clients, which is why we work closely with you to understand your business goals and create a pricing package that aligns with your budget and expectations.
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FAQs
How to calculate outsourcing cost?
When calculating the cost of outsourcing, there are several key factors to consider. Firstly, assess the scope of the project and the specific tasks that need to be outsourced. This will help determine the required skill set and the appropriate hourly or per-project rates.
Next, research the market rates for the services you require, considering the location and expertise level of the outsourcing provider to calculate the cost.
What are outsourcing fees?
Outsourcing fees refer to the costs associated with hiring external service providers or contractors to perform specific tasks or functions for a business.
How much do companies spend on outsourcing?
Companies spend a significant amount on outsourcing various business functions. According to industry estimates, the global outsourcing market is valued at over $300 billion annually. Businesses often outsource tasks like IT support, customer service, and accounting to take advantage of cost savings and access specialized expertise. The exact amount spent on outsourcing can vary widely depending on the size, industry, and specific needs of the company.