Outsourcing: Should We?

Credit decisions greatly impact and influence revenues, bad debts and bottom lines. In today’s weak economy many or should I say most bank credit departments have tightened the rains on extending credit. Today, this practice is evidenced in fewer mortgages, personal and business loans applications and approvals.

As a result, many banks and related financial institutions are reducing employee levels by offering early retirements and imposing terminations. It is likely that the current economic conditions will continue for several more years. The housing market is still sluggish and it is having a domino effect on all those businesses which comprise the housing industry: masons, carpenters, roofers, window manufacturers, landscapers and many other related small businesses.

These unfortunate, poor economic times are causing many businesses to rethink how better to control and manage billing and collecting departments. Although there are `ebbs and tides’ in our economy, businesses are re-thinking and re-evaluating the cost-effective attraction of outsourcing some and all these related departments to professionals. There are several clear advantages outsourcing offers; one of which is that the client only pays for results. For example, ABC Bank employs a staff of 20 in the collections department and it costs about $500,000 – $600,000 in salaries and benefits. These fixed expenses remain constant regardless of the level of generated collection revenues.

The company which outsources its collections department only pays for results. That is to say, using the same example, ABC Bank contracts a professional outsource company to conduct the same responsibilities produces about the same level of revenues, yet it would cost the bank about half the amount, but all of the headaches.

There are additional benefits that can result from outsourcing: fewer personnel to supervise, better manage reduce payroll and related expenses, develop new products and services, promotion of personnel to more challenging positions and, more importantly, grow the business.

Finally, businesses and banks are and will be accumulating data and taking decisions on the financial benefits of outsourcing certain or all aspects of collections and credit granting processes. The ideal outsource candidate has in-depth personal and business loan credit and collection experience, performs credit approvals utilizing secure web-based credit bureaus and criminal background checks resources. It’s becoming quite clear that businesses which are on the cutting edge of growth and market penetration will dominate tomorrow’s businesses.