No matter the industry, you must manage your accounts receivable. There are four main options for accounts receivable management. All four options are helpful. The real key is choosing the one that will best meet your needs.
Option 1 – AR DIY
Of course, your first option is one that almost every business starts off with in the beginning: you handling your own accounts receivable management needs. There are some good and some bad considerations with this choice. It’s good because you’re not putting out any additional money outside of whatever software you choose to purchase and implement for your business. For those on an extremely tight budget, this is often the best choice.
There are two main drawbacks to this particular option. The first drawback is found in your own abilities. Do you have the knowledge that is needed to handle your own accounts receivable? Do you understand the basic accounting concepts? Do you know how to use the software that you’ll use? If you don’t have the experience or the knowledge, you could find yourself putting out extra money and extra time to master this part of your business. This brings us to the second main drawback: time.
Although you may have the time in the beginning stages of your business to handle your own AR, it won’t always be that way. At some point you have to make the decision on where you will focus your time. It is often best that you spend your time generating new business to make more money.
Option 2 – Hire a Traditional Employee
Your second option, and probably the one you’re most likely to consider after you no longer have time to handle your own AR, is to hire a traditional employee. A traditional employee can be an excellent idea in many instances. There are some obviously good things about hiring an employee. You’re helping the economy. You can focus your time on your work. You know that your accounts receivable management is handled.
Other considerations that your business may struggle with includes absorbing the cost of hiring and training the traditional employee. Regardless of whether you choose a full or part time person, you must ensure that the person is trained. You must ensure that they have a workspace. You have to pay a salary, handle taxes, provide insurance, and consider other areas of overhead that will likely increase. Consider whether or not your business can financially handle the impact an extra person would have on your resources.
Option 3 – Find a Local Contractor
Maybe you know that you need help, but you don’t want to or can’t hire someone. Your third option is to find a local contractor that can take on your accounts receivable management needs. The plus side of using a contractor is that you aren’t responsible for your taxes. You probably won’t provide them with a work space. So, there’s a significant cost savings involved while you get the same benefit of having someone handle your AR.
The downside is finding someone that has experience and that meets your personal qualifications. You can’t trust your work with just anyone; and unfortunately, it can be hard to totally determine if someone you met on Craigslist can help you in the manner that they promise.
If you opt to use someone local, make sure that you do their homework. Find out their qualifications and whether they’ve done contracting work in the past. You may also want to check to find out whether the person you are considering has Errors & Omissions coverage or some sort of umbrella business policy.
Also, make sure that you provide (and get them to sign) a comprehensive agreement that lays out their responsibilities and that lists that they are your contractor and not an employee.
Option 4 – Outsource to an AR Professional
Your fourth option is to outsource to an AR professional like Clients ARM. Although it is similar to the third option, you have a better opportunity to verify credentials and references. You are able to save time and money as with using a local contractor. When compared to the cost of bringing on a traditional employee, many businesses save around 40% when they choose a virtual provider.
If you’re ready to save time and money on your accounts receivable management needs, call Clients ARM and book your free accounts receivable process review. There’s absolutely no obligation. We work with service providers in multiple industries including, but not limited to, healthcare, law, dental, engineering, and more.