Accounts Receivable Outsourcing Lets You Focus on Products

Don’t you hate it when reality intrudes on your dreams?
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Don’t you hate it when reality intrudes on your dreams?
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Your dream as a chief executive of a consumer technology vendor is to create really cool, cutting-edge products that are striking in their technology, function, ergonomics, design and value—products that will improve the digital lives of your customers and keep them coming back for more.

Instead of living this dream, however, you're faced with the banal daily reality of business. Rather than concentrating on creating “the next big thing,” you’re out there fighting to build and maintain your business. Your time and resources are monopolized by the mundane day-to-day, dealing with foreign factories, warehousing, inventory and distributors, collecting receivables, maintaining cash flow, hiring support personnel, meeting daily expenses, funding growth, and increasing profits. You treasure the few moments you get with the product designers and engineers.

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Many Consumer Electronics (CE) companies  have cleverly minimized operational overhead for their companies—and their executives’ own daily headaches—by outsourcing. For instance, many CE companies outsource their payroll, their inventory and warehousing, their advertising and public relations.

But for some reason, most of these same companies continue to handle their accounts receivable and collections in-house. This means they have to hire a credit manager, maybe multiple credit managers, and collections staff, as they happily add to the number of retailers to whom they sell. These hires, plus the additional costs of benefits and office space, increase fixed costs and overhead and also add to operational headaches if things don’t work out personnel-wise.

It’s understandable that you want to manage these receivables yourself. You make the product—you want to collect the money. The desire to complete this basic business transaction is a visceral one, dating back to that first nickel you earned at your first lemonade stand or that first payment you received from a neighbor for raking their leaves or shoveling their snow. Managing your accounts receivable gives you the ultimate sense of control over your business.

But this is another case of reality intruding on the dream. Even the most efficiently run in-house accounts receivable operation can’t get all your customers to pay you the way your neighbors did. Company executives find themselves spending inordinate amounts of time and energy resolving payment issues—discrepancies between what the P.O. stipulated and what was actually delivered, disputes over damaged goods, late deliveries, retailers’ financial problems, and even plain old-fashioned stalling—often by large retailers who use their size to pressure smaller vendors into sending them more product before paying for what they’ve already received.

All of this accounts receivable uncertainty stretches out already elongated cash conversion cycles to the breaking point, making it tough for companies to meet their daily operational responsibilities, much less finance new product development and manufacturing so they can continue to grow.

Considering all these headaches, why not outsource your accounts receivable operation and let someone else handle the collections and the headaches while simultaneously reducing your operational overhead?

A firm that specializes in accounts receivable management and collections can manage these operations more efficiently than any in-house operation, just as a 3PL provider can better handle your inventory and warehousing and a payroll company can better manage your payroll. Such firms  are familiar with most accounting systems that exist as well as most varieties of payment methods and situations.

In short, outsourcing your accounts receivable management is a win for you giving you more time to focus on your dream of developing and selling cutting-edge products.

Click here to see more information on consumer electronics industry accounts receivable outsourcing on the CE Financial Strategies Center

If you would like to learn more about accounts receivable outsourcing, please contact me at joel.wolitzer@cit.com +1 212 461 5299.

Joel is a business development officer at CIT Commercial Services. With over 18 years’ experience, Joel has structured many financing arrangements for companies in the consumer products space, including consumer electronics, apparel, textiles, and housewares. Joel has a deep understanding of the retail supply chain, as well as the retailers to whom his clients sell.

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