Outsourcing of the core Credit Control function has become a more cost effective alternative for indigenous businesses with a turnover less than three million Euro as a consequence of continuing increases in the cost of direct labour Credit Control employees, it is also a more equitable option regarding the maintenance of positive business cash flow and continued follow up regarding on time payment of invoices due to the difficulty obtaining experienced Credit Control personnel and the disruption caused generally by staff turnover, recruitment and re-training in this area, significantly, the consequences of downtime with direct labour Credit Control can in some cases result in unnecessary and costly business cash flow disruption and the possibility of bad debts.
From our own analysis, the cost of outsourced Credit Control services can be between 45% to 65% of normal FTE Credit Control cost for indigenous businesses with a turnover less than Three Million, therefore this resource outsourcing is an alternative worth considering for certain business models.
To put the real cost of direct labour Credit Control for each Full Time Employee into perspective, currently the real cost of a direct Credit Control resource on an annual salary of € 35,000 is in excess of € 50,000, in real overhead cost terms, these costs should be taken into consideration when reviewing actual Credit Control overhead costs for direct labour solutions.
By contrast outsourcing the credit control function has a much lower percentage of turnover cost for a business with a turnover under five million, as illustrated in the above table and can cost between 45% to 65% of the normal FTE cost for indigenous businesses with a turnover less that Three Million, therefore outsourcing the credit control function is very likely to be the most cost effective alternative, an alternative that will have a bottom line benefit for most indigenous businesses.
The table above is illustrating two examples of the comparative credit control outsourcing costs for businesses with an annual turnover up to three million Euro, the calculation in the table is assuming an average invoice value of € 750 and € 2,500, it should be noted that a variation in percentage of turnover cost may occur for a ledger with different average invoice values.
It should also be taken into consideration that the average Credit Controller would generally have the time resources required to manage up to 600 customers effectively and that more than one FTE Credit Controller would generally be employed where a business has a larger customer base and more low value invoices that would result in more than 600 active customers at any time.
Outsourcing of the Credit Control function also provides the flexibility to deliver the resources necessary regardless of seasonal peaks or increases in customer numbers and can be scaled to meet the changing needs of the business, without delay or disruption to the Credit Control function, collection of payments and business cash flow.