Accounts Receivables Outsourcing Management - Philippe Zamaron, Eurofactor

Philippe Zamaron of Eurofactor tells Finance Director Europe how rising payment times in Europe are turning many finance directors towards the accounts receivables outsourcing market.

Managing cash flow, chasing invoices and dealing with debtors are good examples of activities that for most companies are essential but not core. Once, receivables management might automatically have been handled in-house, or by a company's bank. Now, however, specialist companies, like European market leader Eurofactor, are beginning to make significant inroads into the receivables management outsourcing market.

SECURITY

Long seen as the solution in tight cash flow situations, financing with third-party providers is a distinct, long-term management practice for companies. It is a management practice which is now no longer limited to debt financing, but which involves all accounts of assets, providing security against the risk of non-payment, dunning debtors, debt collection and accounts management.

'Outsourcing allows a company to use the services of a specialist professional to control costs, enabling it to focus on its key activities and its commercial development, negotiating for new deals, instead of wondering whether or not it will be paid,' says Philippe Zamaron, vice-chairman of Eurofactor. 'We save clients time, concern and money. Most companies do not themselves have the specialist know-how in house to manage the three key dimensions, which are receivables management, credit protection and financing.'

ANTICIPATING RISK

The kind of expertise Zamaron is talking about means that a company like Eurofactor is able to assess the financial strength of debtors, and then anticipate their insolvency risk. It is also able to offer fine-tuned and tailored collection procedures that minimise collection delay after payment-due date, and so obtain far shorter payment delay times than their clients can alone.

Managing an outsourcing relationship successfully can be a challenge. For companies looking to outsource receivables management there are several factors critical in creating and sustaining an effective outsourcing relationship.

'A company should look for the facility that best suits its purpose,' says Zamaron. 'Does it need a strong collection service or a confidential facility? Is substantial credit cover or very quick funding important? The company should also pay attention to the quality of the feedback and communication with the outsourcing partner, as it must ensure it is informed immediately in the event of any payment dispute with its customers, or a drop in its credit capacity.'

HIGH-QUALITY FEEDBACK

Given that the outsourcing provider deals with the outsourcer's clients directly, and thus impacts on the outsourcer's reputation, high-quality feedback is a must. In Eurofactor's case, for example, clients are able to follow up the progress of the account receivables management through an online web service, 'Eurofactor-online',

available in six languages (English, Flemish, French, German, Portuguese and Spanish) and with several upgrades every year. Clients can upload invoice files, look for new payments and download daily statements.

In an increasingly global business world, outsourcing firms should also consider how international the outsourcing provider is. With Eurofactor, for example, although it is the leading provider of receivables management in France, over a third of its turnover comes from outside France. The company's network spans seven European countries – France, UK, Belgium, the Netherlands, Germany, Spain and Portugal – and thus offers a European Pass service to multinationals if required.

LOCAL EXPERTISE

'Eurofactor's integrated international network is essential for addressing the needs of our clients, who, increasingly, are seeking a global solution to the challenge of managing their accounts receivables,' says Zamaron. 'We provide our service using professionals with an understanding of the specific economic, cultural and legal characteristics of each country, and who are able to speak the appropriate language.'

A number of surveys indicate that the financing requirements of European businesses are generally on the increase. In Europe, the length of payment periods, for example, is growing due to late payments – with the notable exception of Spain. As a result, expect to see many more companies turning to specialist stand-alone providers of accounts receivables management services as they free up resources to focus on remaining competitive in their core business.