Outsourcing debtor management or automating?
The complete guide for finance professionals
Your order book is growing, but so is the pile of outstanding invoices. Does outsourcing debtor management sound like the ideal solution to relieve your team? Be careful: handing over your cash flow entirely is often unnecessarily expensive and risky for your customer relationships..
At Onguard, we believe in a third way: smart automation. This allows you to benefit from the efficiency of outsourcing while maintaining control and direct customer contact. In this article, we outline the costs, benefits, and alternatives.
Why choose automations?
Why automating credit control could be the right option for you.
What does outsourcing debtor management actually mean?
When we talk about outsourcing debtor management, we mean the process where an organisation transfers all or part of the responsibility for the invoicing and collection process to a third party. This is a broad concept that can take various forms in practice. It is essential to distinguish between these forms, as the impact on your operations and customer relationships varies.
The most common form is factoring. Here, you sell your invoices to a factoring company immediately after sending them. They pay you a large portion of the invoice amount upfront (often 80-90%) and then take over the collection from the customer. Another form is hiring an external administrative office or Business Process Outsourcing (BPO) partner who acts on your behalf but works on their own systems. Finally, there is the traditional route to a debt collection agency, where you only outsource when the payment deadline has passed and internal credit control efforts have failed.
In theory, it sounds ideal: you transfer the 'problem' and receive your money faster. However, it is important to realise that you are also handing over a vital touchpoint with your customer. The way an external party approaches your clients reflects directly on your reputation. Is that third party as committed to your customer satisfaction as you are, or is their focus purely on rapid collection?
Why concider outsourcing debtor management?
There are valid and understandable reasons why companies seriously consider outsourcing. Particularly for fast-growing organisations or businesses with strong seasonal fluctuations, the administrative burden can peak suddenly. The most common arguments we hear in the market are:
- Time savings and focus:
By moving the process off-site, your finance team is relieved of routine tasks. They spend less time on repetitive phone calls and sending reminders, allowing them to focus on strategic tasks or complex financial challenges. - Direct expertise and continuity:
External parties are specialists in collections. They know the latest regulations in detail and have established processes that continue uninterrupted, even during staff holidays or illness. In effect, you are buying guaranteed occupancy. - Improved liquidity (with factoring):
This is often the deciding factor for companies with tight cash flows. With factoring, your funds are available almost immediately—often within 24 hours of invoicing. This instantly boosts your working capital, providing room for new investments. - Scalability:
During periods of explosive growth, you don't need to immediately hire and train extra staff. The external partner scales along with your volume.</li
While these benefits sound attractive, at Onguard we often see organisations underestimate the long-term impact. It may solve short-term pain, but does it help build long-term relationships?
The downside: disadvantages of outsourcing credit control
It sounds ideal: you send off your invoices and an external party handles the rest. Yet, many companies eventually regret this move. When you place the process entirely outside your own walls, you face four major risks:
- Loss of control and insight:
You turn your financial process into a 'black box'. You often don't know exactly when a call was made, what was discussed, or the specific reason a customer hasn't paid. You become dependent on the agency's reports instead of having real-time insight in your own credit management dashboard. - Damage to customer relationships:
An external agency often has only one goal: to collect as quickly as possible. They lack the context of the customer's history or the sensitivity of a specific relationship. A blunt approach or an impersonal email can damage a years-long relationship in an instant, costing you future revenue. - High structural costs:
Factoring companies and collection agencies often work with a percentage of the invoice value or high file fees. With high turnovers, these costs escalate rapidly. Where software is a fixed investment that pays for itself, outsourcing remains a continuous bite out of your profit margin. - Lack of flexibility:
External parties often use standardised 'one size fits all' processes. If you want to make an exception for a strategic client or pause a workflow, it is often difficult and slow to arrange with an external bureau. In your own software, you can adjust this with a single click.
How automated credit management software has helped our customers
What are the average costs of outsourcing debtor management?
A common misconception is that outsourcing is always cheaper than doing it yourself. When we analyse the costs more closely, the opposite often proves true, especially for larger organisations. The costs of outsourcing credit control are typically variable and scale directly with your turnover.
Factoring costs
When looking at factoring, you usually pay a percentage of your turnover. This typically varies between 2% and 5% of the invoice amount, depending on the risk profile and volumes. In addition, there are often administrative fees or setup costs. For example, if you have a turnover of £10 million, a 3% factoring fee means you immediately sacrifice £300,000 of your margin. That is a significant amount that is no longer available for innovation or profit.
Collection agency fees
Collection agencies often work on a 'no win, no fee' basis for the principal amount, but the costs are recovered from the debtor. While this may seem 'free' to you, it imposes additional costs on your customer, which puts the relationship under pressure. In other models, you pay a fixed fee per case or per action.
The software alternative
Compare this with an internal solution supported by smart software such as Onguard Onguard CreditManager. Software is an investment in your own process. You pay for the licence and implementation. These costs are predictable, fixed, and scale much more cost-effectively than a percentage of your turnover. A software licence costs a fraction of the 3% you would lose with factoring. Furthermore, you keep the 'profit' of faster payments—achieved through improved processes—entirely for yourself.
The best of both worlds: Automation with Onguard
What if you could achieve the efficiency of outsourcing while maintaining control over your data and customer relationships? That is exactly the vision of Onguard. We believe that technology enables finance professionals to do more with less effort. With our software, such as CreditManager, you automate the time-consuming, repetitive tasks that you would otherwise outsource.
By choosing smart software instead of traditional debtor management outsourcing, you benefit from:
- Full control: You determine the 'tone of voice', timing, and channel for every touchpoint. Want a friendly email reminder on day 14 and a firmer letter on day 30? You set it up once, and the software executes it perfectly.
- Real-time insight: Our intuitive dashboards show you the status of your outstanding items, your DSO, and where the risks lie at a glance. You make decisions based on live data, rather than relying on a monthly report from an external party.
- A personal approach: Automate the standard workload (the 80%), so your team has time for personal contact with the customers who truly need it (the 20%). This increases both efficiency and customer satisfaction.
- Lower and predictable costs: In the long term, investing in software is far more cost-effective than structurally sacrificing a portion of your margin to a factoring or debt collection partner.
Automated debtor management: How does it work?
At Onguard, we do not view credit management as an isolated administrative task, but as an integral part of the 'order-to-cash' cycle. Our software integrates seamlessly with virtually any existing ERP system or accounting package. Whereas outsourcing debtor management involves giving your data away, our solution allows you to centralise and leverage your data.
With CreditManager, you gain control over the entire process. You can set up workflows tailored to different customer groups (segmentation). For example, a strategic partner receives a different, more personal approach than a one-off small buyer. The software identifies when action is required and prepares tasks for your team. But what if a payment is truly withheld? We have thought of that too.
Through our CaseControl module, you can still transfer a file to a debt collection partner of your choice with the click of a button. This is the crucial difference compared to traditional outsourcing: you remain at the helm. You manage the process yourself first, with all the tools and data at your disposal. Only when absolutely necessary do you escalate to an external party, directly from your own familiar environment. This allows you to combine the strength of internal control with the option of external escalation, exactly when you deem it necessary.
Comparison: Outsourcingvs Onguard software
| Feature | Outsourcing debtor management | Onguard Software (In-house) |
|---|---|---|
| Control | Low (delegated to third party) | High (full command of the process) |
| Customer Relations | Risk of impersonal or blunt approach | Maintained and strengthened |
| Cost structure | Often % of turnover (variable & high) | Fixed licence fees (scalable & cost-effective) |
| Insight & Data | Limited (periodic reporting after the fact) | Real-time dashboards & analytics |
| Internal time spent | Minimal | Low (due to efficient automation) |
| Risk Management | Reactive | Proactive (e.g. via PolicyManager) |
Trusted by organisations worldwide
They already use Onguard debtor management
How to best automate debitor management?
Automation is not a 'plug-and-play' trick; it is a fundamental shift in your way of working. To successfully automate your credit control and minimise the need for outsourcing debtor management, we recommend the following steps:
Analyse your current process
Segment your customers
Choose the right software
Set up workflows
Train your team
Monitor and optimise
How do I choose the best partner for debtor management?
The choice of a partner depends entirely on your strategy. Are you simply looking for someone to do the 'heavy lifting', or are you seeking a partner who will help you structurally improve your internal processes? When you choose Onguard software, you choose a partner with over 25 years of experience in credit management. We don’t just provide the tool; our consultants proactively contribute to the design of your processes. This ensures that you don't just automate, but actually improve.
Key considerations when selecting software:
- Integration capabilities: Does it link seamlessly with my accounting package or ERP? Onguard offers standard integrations with all major systems.
- User-friendliness:Is the dashboard intuitive for my credit controllers?
- Scalability: Can the software grow with my company as we expand internationally?
- Support and consultancy: Do I receive expert help with implementation and continuous optimisation?
Our solutions are specifically designed for larger organisations and finance teams who understand that cash flow is the lifeblood of the business. We help you transition from reactive handling to proactive credit management.
Frequently asked question about debtor management
To provide you with comprehensive information, we have answered the most frequently asked questions on this topic below.
Conclusion: Choose control, connections and results
The dilemma between outsourcing debtor management and managing it yourself is a thing of the past, thanks to modern technology. You no longer have to choose between efficiency and control; you can have both. With Onguard’s solutions, you automate the heavy lifting, reduce administrative pressure, and improve cash flow—all without jeopardising the valuable relationships you have with your customers. Your finance team transforms from an administrative department into a strategic partner that adds real value to the business.
Are you ready to take the next step and see what automation can do for your organisation? We are happy to help you design the optimal credit management process. Together, we can ensure you get paid faster, save costs, and increase customer satisfaction. Because at the end of the day, your customer relationships are too precious to simply hand over to someone else.
Want to learn more about debtor management?
Dive deeper into the world of debtor management and credit management.