As Asian economies continue their rapid economic expansion, businesses increasingly trade across borders—both within Asia and to other parts of the world, including the United States and Europe. As a result, the management of accounts receivable has grown more complex. While many Asian entrepreneurs continue to handle invoice collections by themselves or have employees do it, a rising number of them are turning to professional accounts receivable management agencies. This is an especially salient trend for businesses that obtain a large share of their revenue from other countries. This shift reflects both the growing sophistication of the region’s business landscape and the persistent challenge of late or unpaid invoices that is universal in nature—a problem that can quickly escalate from operational headache to existential threat for cash-strapped SMEs.
Accounts Receivable Management Trend
Recent projections underscore the importance of the trend. The Asia-Pacific region is now the fastest-growing market for both human accounts receivable management services as well as for software-based accounts receivable automation. The latter trend is characterized by an annual rate of 15% that experts expect it to grow by over the next five years. With this figure, the market outpaces the global average.
Much of this growth is driven by the adoption of software platforms that have been developed by IT companies like Invoiced and BILL. There are also platforms that have been developed by leading accounts receivable agencies, such as Atradius’ Credit-IQ. These software tools help its business users send out payment reminders automatically to customers. They track incoming payments and summarise these information into reports and dashboards. The promise that the companies behind these tools claims it delivers to their clients is that it helps them increase their working capital and that it reduces the costs involved in chasing invoices. These companies also claim that the use of these products helps reduce the administrative burden and that in doing so it saves companies time and hence also money that would have otherwise been spent on salaries. Some of these companies, such as Atradius Collections, combine the automation features of such software with human-produced accounts receivable management services. This stands in contrast to software products from IT companies, which typically would have to partner up with a third party accounts receivable management agency to be able to offer similar benefits to their clients.
Reasons As To Why Accounts Receivable Management Agencies Are Gaining Ground In Asia
Across Asia, many companies find that automation alone is oftentimes enough. Especially when dealing with the most persistent of arrears, human activity remains an important component of the collections process. Also when dealing with customers in different countries, customers who speak a different language, customers that are based in coutnries that have a different legal system, or a different culture, many companies struggle to effective collect outstanding invoices. This is an area where accounts receivable management agencies provide value that is difficult for many Asian businesses to replicate by themselves. Many businesses lack the multilingual, multicultural staff that they would need to speak to their customers in their own language. And starting a lawsuit in another country is quite challenging for many businesses that operate outside the legal sector. This helps many Asian SMEs to focus on their core operations while leaving the difficulties of cross-border accounts receivable management to reputable international agencies.
Local Vs. International AR Management Agencies
One trend that can be observed is that businesses opt for local agencies when dealing with domestic customers. The accounts receivable agency market is one that is atomistic in nature, with many SME players and a relatively large number of one-person agencies operating from home or from co-working spaces. When it comes to international clients, many Asian bussineses look to large, established, international players for the collection of their invoices. An important reason as to why they choose to do so is the perceived greater ability of these agencies to escalate matters legally in the country their customer is based in in case that should prove necessary. Agencies based in the United States, Western Europe, or international hubs like Singapore—where English is widely used in business and legal systems are robust—are increasingly favored.
Li Ming, a senior account manager at Atradius Collections with extensive experience across the Asia Pacific, confirms the rising demand he has sees in various Asian countries, including Japan, South Korea and Singapore. “We’ve seen a noticeable increase in business from Asia over the past few years, including a few countries such as Japan that have not had the highest growth economic percentages at the national level,” says Li. The goes on to explain that “as the region’s economies grow and companies expand internationally, the challenges of collecting payments across borders have become evident to many business owners. Many of them are starting to relize that professional accounts receivable management agencies like Atradius can navigate legal complexities and cultural differences far more effectively. In the case of smaller companies, hiring lawyers of their own may defeat the purpose in the financial sense of the word, cause this tends to be quite costly. And in case of larger companies, in-house teams may be overburdened or may lack the competences required for cross- border accounts receivable management, such as the command of foreign language and knowledge of other countries’ legal systems.”
The Growth In Demand For Accounts Receivable Management In Asia
The growth of the both the accounts receivable management and the AR automation markets points to a clear shift in behavior, across Asian countries. This includes both more advanced economies like those of Japan and South Korea as well as emerging economies of, among others, Indonesia and Thailand. The strategic importance of accounts receivable management has risen dramatically, with 62% of respondents in a recent survey reporting that accounts receivable management has become of greater importance in their companies compared to five years ago. This suggests that businesses are not only investing in technology but are also more open to outsourcing aspects of the process to accounts receivable management experts.
Professional Accounts Receivable Management
In the survey, many business owners indicated that the benefits of this approach are evident to them. Hiring a accounts receivable management agency, they said, helps improve their cash flow, makes it more predictable for them as to when the money comes in, which helps make it easier to plan investments and other expenses. The survey results also idicated that the use accounts receivable management helped reduce their administrative burden, which allowed them to dedicate more time to their core activities. A clear result that the survey also indicated was the reduction in the occurrence of bad debt. For many small businesses managing their receivables in-house, leveraging comprehensive invoicing tools can make the process significantly smoother and more professional. Asian entrepreneurs seeking an efficient way to create and personalize billing documents can benefit from a wide range of invoice form samples that offer free, downloadable templates. These resources help streamline documentation, ensure all essential invoice elements are included, and make it easy to maintain consistency as companies scale across borders.
The survey also indicated that many Asian SMEs still handle a large part of their accounts receivable in-house and that in business with no more than five employes it was often the owner him- or herself who did the accounts receivable management. Reasons that were stated for this were often the preference for direct customer relationships. There may be a cultural component to this in many Asian countries, where compared to the United States and Europe there is often more of a personal relationship involved in business dealings. In the survey entrepreneurs also often mentioned a reluctance to involve third parties in financial matters, which were viewed as sensitive by many respondants. For international cases, however, the calculus is evidently changing. As Li Ming of Atradius Collections puts it, “For many entrepreneurs across Asia it is plain to see that the cost of doing nothing, especially when dealing cross-border transactions, can easily be higher than the cost of professional help.”
