What is Credit Outsourcing

Outsourcing is one of the "Buzz Words" of business that is used so frequently thoughout so many industry sectors today. The concept of outsourcing is based on your business removing activities from in-house work processes and passing them out to another business who carries out these activities on your behalf.

In order to run a profitable business you need to ensure that your company operates more effectively than your competitors. Your business needs must input the greatest level of value into the sourcing/production/sales chain (the value chain) as physically possible. In doing this, your business will generate the greatest level of sales, the cheapest production, the highest level of quality and the best return on investement.

The value chain concept is what underlines the whole reason for outsourcing business activities. You focus on what your business is best at in order to input your greatest level of value. For example, your business may be built up on the quality and cost of your production activities. This then means that there are several non-core activities within your business that need to be carried out, but are not considered to be in the area in which your business is most effective.

If your business is not a specialist in a particular activity, then generally speaking, this is an activity that you should look to outsource (get someone else to carry out the function on your behalf). What is a non-core activity for you may be a core business activity for another business.

The most popular outsourced functions for many businesses are IT, Accounting and Legal activities. The reason that they are outsourced is that they are highly skilled tasks, they are tightly regulated and companies that specialise in these areas can carry out the functions much faster, more cheaply and to a higher quality than most other businesses can do them themselves.

Credit Management is another non-core business function (unless you are a credit management agency that is). The credit function is also highly regulated, requires specialist knowledge and skills, can be fairly time consuming. All of this can add unnecessary cost to your business whether through times spent on credit control, bad debts, expensive finance agreements or through other means.

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