Many information technology (IT) departments are outsourcing key functions these days to boost efficiency and profitability. But what about outsourcing your credit department? As a credit manager of a large organization you may face a number of resource issues, some of which you may be able to solve through outsourcing.

In general, outsourcing can address three major areas in a credit department: systems management, project implementation and day-to-day credit management. Systems management is the maintenance of all hardware and software, including daily processing, upgrades, software fixes, disaster recovery, backup and system performance. Project implementation includes everything required to install and implement solutions related to credit management. This may include third-party resources, such as application vendors and/or consulting firms. Day-to-day credit management includes daily activities such as customer service, collections and cash management, among others. Having an understanding of each area as it relates to your business needs will help you determine if outsourcing is an option for you.

Addressing Systems Management Issues

Technological advances have changed the landscape for credit management software creating a plethora of internal and external data sources that credit managers need to do their jobs. Access to and efficient management of these data sources is essential for reducing days sales outstanding (DSO), managing collection efforts and staying customer focused with current information. Tying all the necessary data together from internal billing/sales order entry systems, to external credit agency links and other sources can be challenging for a company with limited resources. Data must be accurate, timely and guaranteed around the clock if a company wants to maintain a competitive edge.

Outsourcing may be an option for a company with limited IT resources. The benefits to outsourcing systems include: better control over IT costs for a specific application, minimized investment in specific applications, up-to-date versions of specific software applications and effectively deployed resources within an organization. In addition, you can utilize the latest technology for your business and your in-house IT staff can focus on more important issues. The outsourcer is responsible for guaranteeing that the systems and information will be there 24 hours a day, seven days a week. For many companies, this provides a real sense of security.

Project Implementations

Project implementations raise a host of concerns and questions: Do you have the resources to implement the software? Are certain skill sets required of the in-house staff to deploy and operate the software smoothly? If your company doesn't have the skill sets or resources, how and where can you find them? Major deployments are resource-intensive, and pulling IT staff away from other critical projects can be a real juggling act.

Companies with limited capital may find outsourcing software deployment more financially appealing because they can spread the cost over the length of the contract with the outsourcing company. An outsourcing firm specializing in credit management software deployment can offer a business the expertise and experience needed to ensure a smooth and coordinated installation. When outsourcing entire project implementations, companies should look for outsourcers that will assist with everything from capacity planning to specification and configuration requirements, order administration, system build, site delivery and post delivery audits.

Day-to-day Credit Management

Limited resources can severely affect a company's customer service, collections, online entry and statement/billing efforts. Credit management activities that are inefficiently managed make credit applications difficult to process, delay credit decisions and cause a company to lose money. Credit that is not thoroughly checked can increase bad debt, and delays in issuing statements and billing are extremely costly.

It is important for processes to be in place that prioritize the credit management function and enable credit managers to easily monitor customer account activity in real-time. Some companies can address this need using systems that automate the credit management process. If resources are still stretched after all credit management processes are automated, an outsourcer can then provide the extra resources required to keep up with day-to-day activities.

Outsourcing Considerations

While outsourcing some aspects of a company's operations can be a positive step toward addressing limited resources, credit managers should proceed with caution. Giving responsibility for any portion of a company's vital business processes to an outside entity can be risky.

Outsourcing can give a company access to the latest technology for greater automation, but there may be vendors that can do the same thing. Outsourcing of day-to-day credit management processes, such as customer service or collection efforts, requires an outsourcer that will complement your corporate culture and philosophy. For instance, a company with a good reputation for customer service would not want to use a firm that has an aggressive approach toward clients and is only focused on pulling in the money. You should also look for an outsourcer you can trust, with experience and good reputation for reliable service and confidentiality.

Outsourcing is an option that many companies rely on for various reasons to compete in today's marketplace, but it isn't right for every organization. Companies concerned about security and dependability will choose to operate credit management strategies internally. But for some companies, limited internal resources or special projects might force them to seek the support of an outside organization for specific business processes. Other companies use outsourcing as a more cost-effective way to keep up with rapidly changing technology, while still other companies feel outsourcing gives them peace of mind and helps them work better when it comes to managing information. Be sure to closely examine the pros and the cons of outsourcing for your business before making a decision.

Becky Gray is Director of Sales Support for QSP, Inc.