Outsource Your Personal Life", read the heading of an ad in an airline in-flight magazine. Now we are being told that someone else can live the best part of our lives better…and we pay them to do it? It turned out to be an ad for a matchmaking service. Mail order brides/grooms over lunch.

The appeal of outsourcing is that by letting someone else do it we 1) don’t have to pay prevailing local wages, 2) save on employee costs like a place to work, health insurance, pay raises, taxes, 3) save time and energy in not having to train and manage people, 4) pay only for what we use and avoid “deadwood” during slowdowns.

Some people, mostly outsourcing people , have even gone so far as to state, “If others wouldn’t hire you to carry out a specific business function it should be outsourced.”…… Baloney.

If we outsource business functions that we do poorly or where we lack an expertise, for example….website design and upkeep, we can achieve a quality improvement. However, this does not hold true for those business functions that provide companies with an unique competitive advantage.

Core Competencies:

There are critical business functions or aspects of business that are particular to each company, where an in-house and on-site expertise provides a unique competitive advantage. Those things that a company can best do for itself can not be outsourced without a loss being suffered.

And yet B2B, business to business, credit and A/R management are among the business functions being marked for outsourcing.

The reason that some companies would even consider outsourcing Credit and A/R management is that the old “risk management” mindset still prevails. Credit and A/R management, when properly understood and carried out supports new sales, customer service, cash flow , repeat sales and internal efficiencies.

B2B Credit and A/R Management are critical business functions , whose true potential has yet to be realized by many companies, and along with other core competencies they can not be outsourced without a loss being suffered.

The business functions that provide the “best value proposition ” for a company should not be outsourced.

Change and Competition:

Change and competition define the business environment at the start of the 21st century. Those companies and individuals that best deal with change and competition will survive and prosper. Business models have changed and flatten . Data and communications technology has cut through the ranks of mid-managers and supervisors like a plague of biblical proportions . Today, smart managers try to get as close to the customer as possible so that they can best respond to change and competition; they want to be in the “inner circle”.

The Inner and Outer Circles:

In the old value chain model business activities were divided into two categories called upstream and downstream. Upstream referred to vendors and suppliers who provided products and services needed by a company to produce or provide it’s own product or service. The business activities that delivered a company’s product/service to the end user were called “downstream”. A company would then try to position itself between “upstream” and “downstream” business activities.

A better model is one where business activities are defined by two circles, an inner and an outer circle that surround a point in the center. Customers, who should be the center of attention anyway, make up the point in the center.

The inner circle is the one nearest to the customers and its activities are ones that contribute to long term relationships with customers, vendors and between those business functions involved in inner circle activities. This, in turn contributes to the success of a company .

The outer circle is comprised of those business activities that support the work of the inner circle. For example…a credit reporting or credit rating service supports the work of the credit function.

B2B Credit an Inner Circle Activity:

Inner circle activities are those tied to relationships and unique proficiencies that make a company superior to competitors. Most business managers would agree that sales is a “core competency” and belongs in the inner circle of business activity, after all, with everything else being equal who do customers buy from, someone they like or someone they don’t like?

But credit as an inner circle business activity? Isn’t credit just an accounting thing where credit scores and customer profiles are the determining factors? Isn’t calling past due customers for payment counterproductive to the sales relationship?

The answer on both counts is, no.

Consumer credit approval is black or white…either you have the credit score needed or you don’t.

However, B2B credit approval is different. First of all,in the case of B2B credit, the investment made in getting a prospective customer to the point where they want to buy is much larger. There are normally fewer customers and once rejected for credit their goodwill can be lost forever. An other factor which makes B2B credit different is the seller’s “product value at the time of sale”, i.e. margin, demand, capacity. Some businesses make their money on volume discounts from their suppliers, in this case, approving even a high risk customer may be profitable; if the company needs the volume.

Consumer past due contact is also different from B2B a/r management. The reasons consumers haven’t paid are clearer . Consumers either forgot, they don’t have the money or they won’t pay.

However, B2B past due A/R management is, for the most part, a matter of finding out what when wrong where and fixing it.

Past due A/R management is about keeping the customers current and buying, as well as identifying and controlling the small percentage that are unable or unwilling to pay.

In many businesses, 70% plus of all past dues are tied to something having gone wrong. Tracking the “source” of things that have gone wrong will provide information on how to constantly improve business processes. In a competitive environment, a company must not only have quality in it’s product or service, it must also have quality in the way it carries out business activities.

Credit and A/R management are business activities that deal with customers, sales, accounting, operations, transportation, lawyers, vendors and many others; depending on the source of those things that go wrong.

Sharing intelligence to create improvements, finding ways to accommodate profitable credit sales while remaining confident of payment, keeping credit customers current and buying (the most profitable sale is the repeat sale) are primary benefits of profit focused credit. The best value proposition for the B2B credit function is to support the efforts of the other core competencies and inner circle business activities.

A business function that boosts efficiency, quality, relationships and customer and vendor retention provides a company with a unique competitive advantage and can not be outsourced with out a loss being suffered.


The goal in business is get close to customers. How can that happen if a core competency is removed from the process? No one would outsource the sales department, why then would they want to outsource the credit function?

Companies, where Credit and A/R management are still seen as a cost center, a negative, an accounting function and as a necessary evil would probably benefit from outsourcing the function because they sure aren’t handling it correctly . They would be better off in the short run, but in the long run they’d lose a competitive edge.

Fire the employees and ship their jobs off to India…or somewhere and save….maybe.
Or maybe do things smarter and better?

Ultimately, those business functions that provide the “best value proposition” for a company should not be outsourced…and neither should your personal life.

The Author
Abe WalkingBear is an International Speaker / Trainer / Consultant on the subject of  cash flow / sales enhancement and business knowledge organization and use. Developer of the copyrighted Profit System of B2B Credit Management, and President of www.abewalkingbear.com, he is the author of Profit Centered Credit and Collections 1999, co-author of STAFDA’s Foundations of a Business 2007, and co-author of the new international book, The Best Kept Profit Secret: The Executive’s Guide to Transforming a Cost Center 2009.

Bron: A/R Management Group