In Focus Commercial Credit
Not just ‘in or out’ – make sure it is ‘right’
Outsourcing to lower cost locations can be an option for many firms, but you should be clear on your goals and seize the opportunities
Gary Brooks Hitachi Business Partner Europe
Gary.Brooks@
Hitachi-eu.com
The outsourcing industry continues to grow, whether the model is near-shoring or off- shoring, or a combination of these. More than 90% of major quoted companies have expressed an interest in starting, or continuing, to outsource. Many firms, in contrast, have a captive
shared service (in-sourced) model, with a small or large degree of centralisation, typically in a low-cost country for high- volume transactional activities. The trend does not look like reversing and
so-called higher added-value activities are increasingly considered, like management accounting and financial analysis, as the outsourcers climb the value chain. The objectives, and potential benefits,
are obvious: cost reduction, standardisation, ERP reduction, integration of acquisitions, rationalisation of locations, culture change, access to talent pools, and refocusing on core activities.
No exception Credit and collections, or order-to-cash, is no exception, with around 40% of major companies having outsourced part, or all, of collections and accounts receivable; and more than 30%, billing. Of course, not all outsourcing or captive
shared-service projects succeed or reduce cost to the extent forecast in the business plan. Indeed, many companies end up re-shoring the outsourced activities, usually into a centralised, captive model. So, a great deal of care should be taken
to ensure that the company is adopting the right model for the business, the culture, and its end customers; and that the objectives are achievable.
16 Achieving the objectives requires strong
sponsorship and engagement, as well as robust project and change management. So, what are the main considerations,
and which activities could be entrusted to an outsourcer?
Higher up the credit value-chain, credit
reviews can also be considered, or at least the elements of the process that are manual and transactional. In this area, transactions below a given
value threshold, and within specific rules, can be entrusted to outsourcers, as they can be fairly routine and low-skill. Any exceptions falling outside the rule set would be referred back to expert on-shore staff.
What we are talking about here is ‘right-sourcing’, achieving the right balance for the organisation in question and considering activities, and elements of activities, which could be described as transactional or administrative
Achieving your goals In essence, any activity that could be easily described and documented, and wrapped in a set of rules, is a candidate for outsourcing. These activities are, typically, invoice production and dispatch, cash allocation, and reporting. However, why not collections for the high
volume of lower-value accounts – say the 80% to 90% of accounts that represent 10% to 20% of receivables value? And what about order management and release for these customers? As long as the outsourcer can provide the right package of language, and technical and people skills, and your company is committed to managing the relationship and monitoring through SLAs and KPIs, it can work.
www.CCRMagazine.co.uk
Right-sourcing What we are talking about here is ‘right- sourcing’, achieving the right balance for the organisation in question and considering activities, and elements of activities, which could be described as transactional or administrative. Do we really want a highly-valued credit
analyst to spend their time on administrative work, when they could be adding value through their judgement and expertise? This brings me to another important point:
that out-sourcing or in-sourcing to a low- cost environment could be an opportunity to offer more rewarding and experience- rich opportunities to your core retained talent, who would no longer be trammelled by low-skill activities. In short, right-sourcing is often the correct
balanced approach, unleashing the judgement and experience of the core team to better support the business, while the lower-skill work is done at lower cost. A final piece of advice, which comes from
having trodden this path myself, committed a number of mistakes and made several changes of direction: as a very first step, automate and standardise – and then move on to right-sourcing. CCR
April 2017
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