Credit and Collections Outsourcing Takes Hold

To boost working capital and reduce costs, companies are earmarking receivables processes for transfer to third-party providers.

Managing credit and collections in-house is a tedious and complex task, and one that usually devours huge amounts of companies' resources and staff time. So when Richard Spotts, CFO for AmeriQuest Transportation & Logistics Resources Corp., examined his organization's interactions with its customers in this area, he opted for outsourcing. "The goal is to become more efficient and improve the bottom line," he explains.

The Cherry Hill, N.J.-based transportation management company turned over its credit evaluations, credit decision-making and e-commerce transaction processing to a third-party provider in 1999. It also outsourced its sales- and purchase-invoicing processes. By outsourcing these functions, the company reduced the number of credit-challenged customers it has to handle. "We need to deal with quality customers that not only pay but pay in a timely manner," explains Spotts.

As a result of the initiative, AmeriQuest's internal five-person accounting staff oversees the outsourced processing of some 150,000 invoices a year. The company's bad debt has plummeted to about 0.15 percent of its revenue, compared with an industry average of 4 percent to 5 percent. "In an industry that has gone through a lot of ups and downs, we've managed to remain stable," Spotts says. "Outsourcing has proven beneficial and allowed us to focus on the core aspects of our business."