Did you know approximately 25% of businesses face bankruptcy due to late payments? This is a reminder that successful failed payment recovery can boost a company’s financial stability.
However, high failure rates associated with card payments fail highlight the challenges and administrative burden they create for businesses, emphasizing the need for diverse payment options to ensure reliability and flexibility. For the process to be effective, it needs to be systematic, consistent, and executed with expertise—a problem for an in-house team trying to multitask while handling everything else on their plate.
Here’s where an outsourced team, solely dedicated to payment recovery performs better. This blog lists why an outsourced service makes recovering failed payments much easier than doing it in-house.
Let’s go over some key factors of payment recovery and why outsourced payment recovery wins.
Access to specialized expertise in failed payment recovery
Sure, an in-house team can technically handle payment recovery. But that’s not their core competency. You must have hired them to be a customer service agent, a sales rep, or a marketer. They’re juggling invoicing, campaign reporting, and customer service escalations—and payment recovery is just another task. Let’s just say “A generalist will never outperform a specialist in a highly complex, high-stakes process.”
The outsourced payment recovery advantage
Outsourced payment recovery teams do one thing, and they do it exceptionally well. Specialized failed payment recovery professionals’ expertise combined with singular focus can make all the difference between recovering 30% of failed payments vs. 70% or more.
Actually, process expertise is among the top factors (at 26%) why businesses outsource. When businesses outsource to experts, they can expect the use of best techniques and industry insights, the tried and tested playbooks that drive predictable success, and the use of regulatory knowledge to systematically reclaim revenue.
Utilization of advanced technology in payment processing
Is your in-house collection “system” basically a glorified spreadsheet? Chances are, they still rely on manual follow-ups, some basic invoicing software, and CRM reminders—all of which leave a gap in efficiency and success rates. The reality is that payment recovery is a specialized, tech-driven process so if your business isn’t using the best tools (which is a huge investment, by the way!), you’re missing out.
The outsourced payment recovery advantage
Here’s the thing about payment recovery gap. The gapbetween the revenue you could recover with the right technology and strategies vs. what you’re actually recovering with outdated systems and manual processes is pretty wide. When you decide to outsource to a payment recovery agency, you’re also investing in their sophisticated technology to eliminate that gap and improve recovery rates. This is how they do it:
- use of AI in cash flow optimization including timing for maximum recovery success, automated reminders, and personalized recovery strategies
- utilization of tracking tools provide live visibility into failed payments including customer response patterns
- forecast which accounts are likely to recover and which need intervention for proactive recovery efforts
Cost efficiency is a winner
Maintaining an internal operation means ongoing expenses for salaries and technology infrastructure. These costs remain fixed, regardless of performance. Outsourcing the implementation of the payment recovery process can be a cost-effective solution for overdue payments. So, finding, hiring, and training someone specialized in payment recovery? That costs a fortune, whereas businesses actually reported savings of up to 40% through outsourcing.
The outsourced payment recovery advantage
It’s often cheaper and more efficient to rent the expertise than to own it. Outsourced payment recovery teams keep costs flexible and performance-driven. A true cost-effective recovery solution. How? Their model allows businesses to pay for results only, avoiding ongoing expenses like salaries, benefits, and office space. More specifically, this is how they do it:
- service without the long-term expense
- leverage outsourced agencies’ existing platforms at no extra cost, plus resources are adjusted based on actual recovery needs
Scalability and flexibility are possible
Some months, you might see a surge in failed payments due to seasonal trends, economic shifts, or operational changes. Efficient payment collection becomes crucial in managing these fluctuating volumes. Other times, volumes drop—and having a full-scale recovery effort becomes unnecessary. This unpredictability is an in-house team challenge. Hiring and training new staff just for a temporary surge? That’s a slow and expensive process. And what happens when things slow down? You’re stuck with more staff and team members than you actually need.
The outsourced payment recovery advantage
Outsourced agencies eliminate this problem entirely. They offer on-demand scalability to get the exact level of support they need—payment recovery efforts always align with real-time business needs. Whether payment failures double overnight or shrink to a fraction of their usual volume, outsourced teams can adjust.
- Complete adaptability—scale up, scale down, pay only for what you use—they have a larger pool of trained professionals ready to go
- They can adjust the number of agents, the hours they’re working, and even the specific skill sets applied to your account based on your current needs
- They already have the infrastructure in place and they have already invested in the technology and processes to handle fluctuations in volume
Enhanced focus on core business functions
Time and attention are finite. When an in-house team is tasked with payment recovery, it’s rarely their only responsibility. Businesses often face challenges when it comes time to collect payments from customers, particularly with overdue receivables. They’re balancing customer service, finance operations, and strategic initiatives—meaning that collections become just one more item on an already overloaded to-do list. And when you treat getting paid like something trivial, you’re gonna get afterthought-level results as well.
The outsourced payment recovery advantage
Outsourcing makes it possible for you to focus your internal resources on revenue-generating activities without skimping out on payment recovery. There’s a clear division of labor within the business ensuring that every task is handled by the right team. So just let the experts handle the “sometimes tedious and time-consuming” task of recovery. This is how they do it:
- They free up your most valuable resource—human potential—so there’s no more context switching
- They work seamlessly with existing systems and customer service workflows for a smoother customer experience which leads to higher customer satisfaction
- They manage the entire recovery process (from first-contact reminders to escalated recovery strategies)
Hassle-free compliance and risk management for overdue payments
Payment recovery is about doing it the right way. Implementing diverse payment processes is crucial to ensure smooth transactions and improve customer satisfaction.
And the right way means staying compliant with constantly evolving regulations that dictate how, when, and why you can reach out to customers about failed payments.
Here’s an example: Non-compliance with the Fair Debt Collection Practices Act can result in penalties of up to $1,000 per violation. Now, your in-house team? They might not be experts in these laws. They could accidentally say the wrong thing, cross a line, and land you in serious legal consequences.
The outsourced payment recovery advantage
Professional failed payment recovery agencies have compliance experts on staff, constantly monitoring legal updates and adjusting recovery strategies to stay within the lines. Think of the outsourced agencies as your legal shield. They know the rules, they train their people on the rules, and they have systems in place to make sure they’re following the rules.
Failed payment recovery specialists also respect and adhere to PCI compliance. This ensures that they will help you avoid complex compliance requirements and costly penalties associated with data security violations.
Preservation of customer relationships and customer satisfaction
Let’s be honest—no business wants to lose a customer over a failed payment. Sending payment reminders is crucial to maintain customer satisfaction while ensuring timely payments.
But the reality is, if payment recovery is handled the wrong way, that’s exactly what will happen. An in-house team, no matter how well-intentioned, isn’t always equipped to navigate these situations with the right balance of persistence and tact. They’re emotionally invested and may go too soft on a longtime client to “preserve the relationship.”
The outsourced payment recovery advantage
Outsourced payment recovery teams remove the emotional bias while maintaining a customer-first approach. They know that a failed payment is just a hurdle that needs to be handled—nothing personal. After all, a failed payment is a form of involuntary churn.
Experts do it in a way that keeps customers engaged, satisfied, and willing to continue doing business with the company.
Performance metrics and accountability
If you’re running an in-house recovery team, how do you measure success? Are you tracking every recovery attempt? Analyzing conversion rates? Adjusting strategies based on data?
Sure, sending payment reminders as a proactive measure in the payment recovery process can enhance communication with customers, ensure timely payments, and establish a consistent follow-up schedule as invoices become overdue. However, most in-house teams don’t have structured performance evaluation, which means inefficiencies go unnoticed, and lost revenue piles up.
The outsourced payment recovery advantage
Outsourced payment recovery teams, on the other hand, operate under strict performance metrics. They don’t just “try” to recover payments—they’re contractually bound to deliver measurable results. And because their business depends on proving their value, they don’t just track success—they optimize for it. This is how they do it:
- provide regular, detailed reports so you’ll see the key metrics, the trends, and the progress
- work under service level agreements (SLAs) that outline clear recovery goals, timelines, and benchmarks
- because they’re constantly tracking and analyzing data, they’re always looking for ways to improve
Choose expertise, choose outsourced payment recovery
Having the right expertise, tools, and strategy, you can recover more revenue. While in-house teams juggle competing priorities, outsourced payment recovery agencies focus solely on one thing: getting failed payments back in the most efficient and customer-friendly way possible. The takeaway:
- Expertise? Specialized agencies are professionals with invoices who use recision-targeted, psychologically informed recovery strategies.
- Technology? They’re using advanced technological ecosystem to keep every failed transaction to recovery under control.
- Cost efficiency? No fixed overhead of maintaining a full-time team. Just variable costs.
- Focus? Let the pros handle the chasing payments so your team can focus on selling, innovating, and keeping customers happy.
If your current approach isn’t delivering the recovery rates you need, it’s time to assess your strategy and consider outsourcing. Reach out to LTVplus to learn how our Recover Payments solution can improve your payment recovery process.
