The challenges and costs of outsourced collections for SMEs

The problems of non-payment and collection for SMEs

Collection is important for all companies, whatever their size.
However, it is vitally important for SMEs and VSEs.

Three observations about SMEs and unpaid bills:

Unpaid invoices have a direct impact on a company’s cash flow

It’s a well-known fact that the majority of SMEs have less cash at their disposal than larger companies.
If a customer fails to pay, this can have a disproportionate impact on the finances of the VSE or SME.
Effective debt collection reduces this risk.

SMEs lack resources for collections

Unfortunately, SMEs, by definition, often have smaller staffs and fewer specialized, skilled resources to manage debt collection.
This can make the task more difficult, requiring more proactive management to avoid non-payment.
Since it’s not always possible to recruit in-house, it can be worthwhile outsourcing reminders to specialist companies such as SSPCollect and its Collectel service.

Few legal proceedings due to investment costs

Few companies take legal action in the event of non-payment, and even fewer SMEs, because of the cost to the company.
Litigation management is costly and time-consuming, and very small businesses often abandon debt collection after the out-of-court phase.

Some SMEs find themselves faced with unscrupulous debtors who knowingly exploit their shortcomings, deliberately choosing to delay payment of their invoices.
SMEs are often reluctant to take legal action against their debtors because of the costs involved.

A worrying economic context in France

In the current climate, the number of companies involved in insolvency proceedings is exploding at an alarming rate.
It’s common knowledge that these procedures are often very lengthy, and in no way guarantee payment of future invoices.
A bullet in the foot for SMEs, for whom every receivable counts.

→ Find out more : How to take collection action against a defaulting company?According to Banque de France data and monthly monitoring of business failuresBetween July 2022 and July 2023, a 43.6% increase in business failures was recorded.
All sectors seem to be affected, and forecasts for the end of this year leave little room for optimism.
For its part, URSSAF recorded a 69% increase in the number of companies in receivership and a 39.3% increase in the number of companies in compulsory liquidation compared with the previous year.

Why choose an outsourced collection service?

Outsourced collection is a method that involves transferring the “Collection” competence to an external collection company.
This company then takes charge of the entire debt collection process.

You pass on your files to the collection agency, which then takes care of reminding you and obtaining payment of your invoice.

Benefits

When you use a specialized collection company, you benefit from the expertise of collection professionals.
Their dunning methods, contacts and procedures are managed by the collection company, so you don’t have to worry about them:

• Time savings: By outsourcing certain tasks or functions, you free up internal time and resources, enabling you to concentrate more on your core business and higher value-added activities.
• Flexibility: Another advantage of outsourced services is their flexibility. flexibility.
  En effet, contrairement à un salarié embauché à temps complet sur un poste de relance ou de recouvrement, vous pouvez déléguer vos volumes en fonction des besoins grâce à une facturation au % and carry out “one shot” operations.
• Lower costs: Finally, the cost of outsourced solutions is lower than that of in-house management.

 

Find out more: Why outsource debt collection?

Limits to take into account

When you opt to outsource the amicable collection of your receivables, it’s essential to take several factors into account: cost and maintaining good customer relations.

It may be a good idea to inform your customers of your decision to use an external service, and to explain the reasons for this decision in a transparent way.
There are also white-label formulas that make the collection service invisible.

Outsourced collection costs

Outsourced collection works very simply, as it often involves a % on the sums collected.

In the case of “success fees”, the collection company is only remunerated if the collection is successful.
In this way, the collection company has every interest in a successful outcome.
This is particularly true of our international collection in partnership with the Sekundi network.

The company signs a collection agreement with the creditor, clearly indicating the agreed fee. At SSPCollect, for example, pricing is discussed at the launch, with sliding-scale fees based on the volume of outsourced receivables and the freshness of the file.

Interestingly, in certain cases, outsourcing can offer tax advantages, including the possibility of deducting subcontracting costs as operating expenses.

Comparison with in-house collections in SMEs

By way of comparison, small and medium-sized businesses often entrust the management of accounts receivable to non-specialized in-house employees – customer service, accounting and sometimes even administrative departments.
But your employees already have many other concerns.

In the end, no one does this work.
So, to manage your invoice reminders properly, it’s advisable to take on an employee entirely dedicated to this job.
A considerable budget for an SME.