A study conducted by Credit Today indicated that 25% of credit departments do not have adequate staff to manage their workload. So if you have ever wondered the following, you are not alone.
- Should I hire a part-time AR employee?
- Should I transition my part-time position into a full-time position?
- Would more employees make our credit and collections efforts more fruitful?
- Do I have more employees than I need focused on collecting unpaid invoices?
These are all valid questions, and you are not alone in asking them. We hear this question all the time. So what is the magic number of employees you should have for collecting unpaid invoices?
Trick question…there isn’t one. Sorry, we wish it were that easy, too! Because every company is different, there is no magic number or ratio, but we do have a few rules of thumb to help you find it for your company.
As publishers of credit and collections management software, we have worked with companies in a wide variety of industries, from small business to large enterprises; no matter which industry they work in, or which accounting system they use, the question has always been the same, “how many employees do I need for effect accounts receivable management?”
There are a number of different factors to help you decide how many employees you need to have dedicated to collecting unpaid invoices. Some of these factors include:
Accounts & Invoice Volume
Depending on your company, the size of your credit department may depend on revenue per active customer account or the number of invoices managed each month. By analyzing the number of accounts and invoices you have, you can estimate how many collectors, back-up resources, and managers you need to have focused on AR.
Invoice complexity
Many times, manufacturers, construction firms, professional service providers, and other businesses do not offer simple products or services. This can result in complicated invoices and leave room for error and mismanagement. The more complex your invoicing is, the more help you may decide you need. Hiring an additional employee is not always the answer, though.
Revenue
Net revenue per employee will vary significantly by industry. But the credit department is still responsible for managing the collection of this revenue, whether it results from 10 customers or 10,000 customers. We generally see that most companies have at least one part-time accounts receivable clerk when they reach approximately $1 million in annual revenue.
Number of Employees
Smaller companies, which have around 10 full-time employees on staff, typically have at least one part-time accounts receivable clerk. If you are to the point where you think your part-time clerk is a little overwhelmed or that your collection efforts are not working, it may be time to make a full-time position.
Many other factors play into figuring out how many employees you need to collect unpaid invoices to see an improvement in your accounts receivable management.
