While outsourcing has seemed increasingly en vogue as companies look to Mumbai or Manila to cut their operating costs, moving the credit function overseas or simply out from underneath a company’s umbrella isn’t so popular, or profitable, according to NACM’s most recent monthly survey.

When asked “Has your company, or former company, ever outsourced all or part of the credit function?” An overwhelming 77% of respondents answered “no,” while 21% of respondents said “yes.” The remaining 2% didn’t know. Among credit professionals whose companies had outsourced or were outsourcing a part of the credit function, collections seemed to be the first function moved beyond a company’s control. “We have outsourced about 85% of our U.S. and Canada collections to a team in India,” said one respondent. “In Mexico we use an outside contractor to do our collections.” Others noted that their outsourcing partner had a specific collection expertise in one particular industry. “Our experience with our outsourcing partner has been positive,” they said. “Our partner focuses its efforts on companies in a similar industry so they are knowledgeable and offer suggestions on items for improvement and trends they are seeing in the industry. Getting to know our partner through regular communication and on-site visits has helped build a strong relationship.”

Several “yes” respondents, however, added that their outsourcing experience was less than productive or that outsourced functions had already been moved back in-house. “It wasn’t the best situation because it required too much monitoring and concern over alienating customers,” said one respondent. “We brought the positions back to the U.S. for lack of satisfactory work while outsourced,” said another.

Unsatisfactory work and fear of customer alienation were cited by many respondents as reasons why their companies avoided outsourcing altogether. “We have a variety of customers all over the world in a variety of types of businesses,” said one participant. “I feel we would lose the pulse of the customers and marketplaces if we were to outsource any of the functions.”

“Credit is a sensitive section in any company that needs to be handled by specialized personnel. I have seen other departments within my company using outsourcing and it is a mess,” said one respondent. “At one of my prior employers, we discussed the possibility of outsourcing the credit function. The new management at the time outsourced many of the non-financial tasks. It was decided that the customer contact was a key service ingredient and was better serviced internally,” said another.   Courtesy: Jacob Barron, NACM staff writer  (National Association of Credit Managers)

Published in the BIIA Newsletter April I – 2010 Issue