By Mike Daugherty, Co-founder & CEO of Synter Resource Group
Everywhere you look, transportation companies are looking to trim costs and do more with less. With the widespread use of TMS systems, 3PL/brokers, and digital platform brokers, shippers literally have the power at their fingertips to find a carrier who can provide the best service at the cheapest rate. Competition is at an all-time high. In order to survive, carriers must reduce cost and become more efficient.
The question is, how can you increase your bottom line with a highly competitive, and softening, market?
One easy way is to outsource the Accounts Receivable department — or a portion of it.
Why outsource A/R?
To stay ahead of the competition, human capital should be focused on activities that are mission-critical like marketing, sales, and customer experience. Let’s face it – accounts receivable departments are a necessary evil. Every customer should pay their bill on time, but the reality is they don’t for one reason or another. Hiring the right kind of A/R person, training them, and holding them accountable can be exhausting, and collections – by its nature – is not the most glamorous position in the company. And, when looking at production, tenured A/R analysts are surely not as invested as a pay for performance service provider.
Benefits of Outsourcing
- Prioritization – For transportation companies to grow and survive, they need to put heavy emphasis on drivers, safety, customer service, and marketing & sales – which is all proactive in nature. Handling A/R in-house is reactive, costly, time-consuming, and can lower morale. How many times have you dealt with sales vs credit/collections? Outsourcing A/R allows you to focus more on your core business.
- Increased efficiency – When it comes to managing the A/R, typically one of the largest assets of a company, it only makes sense to let a specialist handle it. Outsourcers have powerful technology, automation, and staff that is focused exclusively on meeting aging expectations, which allows for greater efficiency and accuracy.
- Reduce cost – Companies typically underestimate the cost of managing A/R, only looking at the expense of paper, postage, and the A/R analyst, but that is not all of the actual costs associated with it. You have cost in HR (recruiting, hiring, training), Accounting (payroll), Loss of Productivity (sick time, vacations), IT (desk top, hardware, software) and Management (managers, supervisors, admin). Plus, we are in the most litigious work environment we’ve ever been in, and one bad apple can cost thousands of dollars.
- DSO reduction – Those in A/R know that the longer it takes to collect on overdue accounts, the less revenue you will be able to recover. Studies have shown that for accounts that are over 90 days past due, your company would only be able to recover on average 73 cents on the dollar. Over 180, and you’re down to 50 cents. The top carriers in the nation leverage the technology and expertise of outsourced providers to reduce their DSO and increase overall recoveries.
If your company initiatives for 2020 are to improve one or all of the above points, consider outsourcing your Accounts Receivable.
Mike Daugherty is a cofounder & the CEO of Synter Resource Group, based in Charleston, South Carolina. Over the last 17 years, Synter has grown to become North America’s largest, dedicated provider of business process outsourcing solutions by enabling transportation and logistics companies to reduce operating costs, improve back-office processes, and enhance the customer experience. Mike may be contacted at 843-746-2206, or firstname.lastname@example.org.