04.22.2022 | Posted by Erik
How Much Will Accounts Receivable Outsourcing Cost Me?
If you’re considering accounts receivable outsourcing, you may be curious about the cost involved. Pricing tends to be a top concern for companies that need to outsource receivables, and many are wary about commission-based pricing.
To be totally transparent, there is no standard pricing structure or cost in the outsourced AR industry. Accounts receivable outsourcing firms have markedly different pricing structures and models that affect the total cost. For instance, here at Axim, we don’t do commission-based structures at all.
Today, we’d like to shed some light on the different pricing structures and models in the outsource receivables industry, plus share how we do things here at Axim.
The Most Common Accounts Receivable Outsourcing Pricing Structures
There are three different ways accounts receivable outsourcing firms usually structure their pricing:
- Percentage: With percentage-based pricing structures, outsourced receivables firms charge a percentage of collection.
- Monthly fee: With monthly fee-based pricing structures, AR outsourcing firms charge a flat monthly fee, usually based on the number of accounts with an open balance on your aging.
- Annual fee & contract: With this option, you sign a long-term contract for a flat yearly fee.
The best option for your business depends on a number of factors, including how many customers you have, the number of aged accounts you have, and how many open accounts you have on the books.
The percentage-based models tend to cost the most. While annual plans can be cost-effective, you’ll be locked into a contract before establishing trust in a company that holds your accounts receivables in its hands. Which is why Axim offers month-to-month pricing with no long-term contract. Even if you don’t choose us, we recommend that you go with a company that offers a similar payment structure.
Different Models for Outsource Receivables Companies
In addition to the cost, there are a few different models for accounts receivable outsourcing companies. Here are the most popular:
- Software solutions. With these companies, you’re simply licensing their software or app. You use their software for a low monthly fee, making collections easier with features that focus on organizing customer data and perhaps automating certain tasks. However, you’re still completely responsible for the collections.
- Outsource receivables. In this model, you outsource your AR and leave the collections activities to the company. (This is what we do). This option tends to offer the most “bang for your buck” because you get to set it and forget it without paying a fortune.
- Credit guarantee companies. This works sort of like credit insurance. It’s when lenders take on your debts and make calls on your company’s behalf. This is like the Cadillac model of accounts receivable outsourcing, so it’s usually quite expensive.
How Axim’s Pricing Structure Works
Here at Axim, our payment structure is pretty straightforward. We offer month-to-month arrangements, so there’s no commitment required. Instead, we charge a flat monthly fee based on the number of customers with an open balance on your aging.
To determine your flat monthly fee, we look at the following factors, among other considerations:
- How many of your customers have open invoices?
- What percentage of your invoices are aged past 90 days?
- How many total open invoices do you currently have?
- What is your average invoice amount?
If you only have a few customers with open balances, your monthly fee will be less than someone who has a lot of open balances. Ultimately, our pricing is centered around the amount of time it will take for our team to manage your entire portfolio each month.
We’ve found that we’re usually in contact with around 40% of our client’s customers, on average, each month. So, approximately 40% of their clients have open invoices at some point during the month.
We don’t want to charge you based on another company’s average, however. Which is why we customize your monthly fee based on exactly what you have on the books.
This approach allows us to cater to a wide range of clients with different business sizes and needs. Our minimum contract is $500 a month, and certain companies’ contracts are upwards of $7,000 a month, determined by the factors we’ve outlined above. In all cases, we provide you with fair, flat, and transparent pricing with no long-term commitments.
We’re an accounts receivable outsourcing company that won’t hold you hostage. No matter what your books look like, we find that, on average, our monthly fee is 30-40% less than what you would pay with an in-house, salaried employee.