The Hidden Benefits of Accounts Receivable Outsourcing for SMBs

2/9/2026 - By Jeff Clark

The Saltmarsh Summary

  • Every day of excess Days Sales Outstanding (DSO) represents real cash trapped on your balance sheet. That gap typically shows up as a larger draw on your credit line, delayed vendor payments, or reduced flexibility to invest in growth.
  • AR dysfunction reveals itself in uncomfortable places: surprise draws on your line of credit, cash positions that don't match your revenue growth, and awkward conversations with your banker about why collections have slipped.
  • Lenders and potential buyers view AR management as a signal of operational maturity. Weak controls and inconsistent collections don't just hurt cash flow; they can affect your borrowing terms and what someone would pay for your business.

Every business owner knows the number. It's the AR balance sitting on the balance sheet, and the mental math that follows: how much of that is current, how much is slipping, and how much is effectively an interest-free loan to customers who may or may not deserve one.

For small and mid-sized companies, accounts receivable is often the largest working capital line item after inventory. And yet it frequently operates on autopilot, managed by whoever has bandwidth that week, tracked in spreadsheets that haven't been reconciled in months, and escalated only when something goes visibly wrong.

The consequences of this neglect rarely announce themselves dramatically. They accumulate in the gap between reported revenue and actual cash collected, in the aging buckets that drift further right each month, and in the write-offs that eventually force recognition of what everyone already suspected.

Accounts receivable outsourcing is one way to address these risks. But the real value isn't about efficiency or convenience. It's about cash, controls, and what your AR function signals to the people who evaluate your business.

The Cash Math That Keeps Business Owners Up at Night

DSO measures how long it takes to convert a credit sale into cash. Most business owners track it at least loosely, but tracking and acting on it are different things.

Here's the math that matters. For a company with $30 million in annual revenue, each day of DSO represents approximately $82,000 in cash tied up in receivables. If your DSO is running 10 days higher than it should be, that's $820,000 sitting on your balance sheet instead of in your bank account. At $50 million in revenue, the same 10-day gap represents nearly $1.4 million.

That cash has a real cost, and it usually comes out of your credit line or your own pocket. If you've ever wondered why you keep borrowing even though revenue is growing, slow collections are often the culprit. You're essentially financing your customers' cash flow instead of your own.

Here's what makes this especially frustrating: in many cases, the cash is collectible. The invoices aren't disputed. The customers aren't in distress. The money is simply sitting there because no one followed up consistently, or because the follow-up process is so haphazard that invoices slip through the cracks.

This is the core argument for accounts receivable outsourcing. Disciplined, consistent AR management converts revenue into cash faster, and that conversion has a dollar value you can calculate.

The Control Gaps That Auditors and Lenders Notice

Internal controls over accounts receivable tend to weaken as companies grow. The person who used to handle everything gets promoted or leaves. New people get added but aren't trained consistently. The owner or controller is stretched thin and doesn't have time to review aging reports every week.

Auditors look for proper segregation of duties, evidence of regular reconciliation, and documentation of collection efforts. In smaller finance teams, these controls often break down. The same person might create invoices, post payments, and reconcile the bank account. Collection efforts aren't documented systematically.

These gaps create real risk. There's fraud risk when one person controls too much of the cash cycle. There's error risk when reconciliations don't happen regularly. And there's reputational risk when an auditor or lender identifies deficiencies and documents them in a management letter or credit memo.

Outsourcing AR to a qualified provider addresses many of these concerns structurally. Segregation of duties happens automatically because different people handle different parts of the process. Documentation is built into the workflow. Reconciliations happen on a defined schedule because that's how the engagement is designed.

Improving AR Without Jeopardizing Customer Relationships

When business owners consider outsourcing AR, the most common hesitation involves customer relationships. The fear is that an outside party won't handle collections with appropriate sensitivity.

This concern deserves consideration, but it's often overstated. Customers care about accuracy and consistency more than they care about who sends the invoice. A professional collections process, handled courteously and systematically, typically improves the customer experience rather than harming it.

The more significant risk is the opposite: that inconsistent internal collections damage relationships. When invoices go out late, when follow-up is sporadic, when customers receive duplicate notices or incorrect statements, frustration builds. A structured outsourced process often delivers more professionalism than an overburdened internal team can manage.

The key is selecting a partner who understands your industry. Construction companies have different collection dynamics than manufacturers. Nonprofits have different sensitivities than for-profit businesses. The right partner brings process discipline while adapting to your specific context.

Evaluating Accounts Receivable Outsourcing Providers

Accounts receivable outsourcing makes sense for many mid-market companies, but several factors warrant evaluation. Follow these principles to evaluate potential accounts receivable outsourcing vendors:

  • Start with the cash impact. Calculate what your current DSO is costing you in trapped working capital. If the number is significant relative to your borrowing costs or growth needs, the financial case for improvement is clear.
  • Assess your current control environment honestly. If you have documented procedures, regular reconciliations, and proper segregation of duties, you may be managing risk adequately. If you're uncertain about any of those elements, that uncertainty is itself informative.
  • Evaluate how AR fits into your broader financial operations. The greatest value often comes when AR management integrates with other accounting functions—feeding accurate data into cash flow forecasting, informing credit decisions, and providing the real-time visibility that supports better planning across the business. Prioritize vendors that can provide more comprehensive support over those with a narrow, AR-focused scope. 
  • Consider how AR performance might be evaluated in a future transaction. If you're contemplating a sale, recapitalization, or significant financing in the next few years, cleaning up AR now will pay dividends later. Due diligence goes more smoothly when there's a clear story to tell about collections.

The right provider should improve your cash position, strengthen your controls, and integrate seamlessly with the rest of your financial operations.

Level Up Accounts Receivable Outsourcing with Saltmarsh

Accounts receivable isn't just an operational function. It's a reflection of how well a company manages cash, controls risk, and maintains the discipline that lenders and buyers expect to see.

At Saltmarsh,our professionals understand how AR performance affects borrowing capacity, business valuation, and your ability to invest in growth. We work with small and mid-sized businesses across industries including construction, real estate, manufacturing, nonprofits, and faith-based organizations, bringing both technical capability and industry context to every engagement.

Our approach is defined by partnership and close collaboration with your team. Our professionals provide best practices, establish scalable processes and reporting, and ensure appropriate segregation of duties. Your team manages the relationships with your customers and brings a deep understanding of the nuances of your company’s revenue streams. Together, it’s a strong match: industry-leading best practices paired with deep institutional knowledge of your business. 

If your AR function isn't delivering the cash conversion, control environment, or reporting quality your business needs, we should talk. Contact our team to discuss how outsourced accounts receivable support might fit into your broader financial strategy.

About the Author | Jeff Clark

Jeff is a director with experience across outsourced accounting and advisory services. He began his career in public accounting over 35 years ago, focusing on delivering strategic financial solutions. His primary areas of experience include providing financial analysis, fractional CFO services, and strategic consulting.

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