Context: Accounts receivable (AR) is a core finance function responsible for managing invoicing, collections and credit reviews. In large corporates, where AR processes touch multiple functions—including treasury, accounting and shared services teams—decisions about ownership and structure can significantly impact efficiency, visibility and risk management.
For some NeuGroup members, AR sits under corporate accounting or within a shared services center (SSC). Others have embedded more strategic responsibilities within treasury. This often reflects a shift toward more optimization of working capital, as treasury seeks to play a larger role in driving enterprise value.
Member question: “Is your accounts receivable function centralized within a single department or split among multiple departments? Specifically, who manages outreach for overdue invoices and the creation of reserves or write-offs? - “Due to our recent global expansion, we currently do not have a dedicated AR team. Instead, we rely on a third-party logistics provider to manage the daily operations of core distribution functions, which include AR (i.e., invoicing and cash collections/application). Oversight of these activities is divided between accounting, which handles the accounting for inventory movements, and treasury, responsible for credit review and setting credit limits.
- “We are currently evaluating the process for addressing past due invoices and establishing reserves or write-offs. As part of this evaluation, we are considering whether the AR function should be centralized within a single department or continue to be split between accounting and treasury.
- “In addition, we are determining which department should own the processes of customer outreach (either for direct outreach or facilitation/monitoring of such) for overdue invoices and the creation of reserves/write-offs. We are also considering what level of involvement our trade and/or commercial departments should have in such processes.”
NeuGroup Insights reached out to the member for more context. He shared that while there is no standard across corporates for ownership of the AR process, in an ideal world, a low-cost operational team would run the day-to-day process of credit approvals, while treasury is flagged to review larger credit limits and older outstanding invoices. It’s that last step that the current, outsourced team that runs AR for the company isn’t doing—potentially creating credit risk and leaving unpaid invoices on the table.
- “As the treasurer, I have to protect cash, which means collecting cash,” he said. “And if I’m not, I need a process to collect it.”
- “If there are customers who need a high credit limit, or aren’t paying, those need research; they require further analysis. AR is an art, not a science.”
- “But outside of that, AR is operational in nature, so it could make sense if we push most of it to a shared services center or outsource it,” he said. “If you want your higher-paid folks to focus on strategic work, you want to take some of this off their plate.”
- In this model, an SSC, or potentially the third-party logistics provider, would follow a policy written by treasury, with more strategic activities, such as approving large credit limits or establishing reserves for high-risk accounts, escalated to treasury.
Peer answer 1: “Credit and AR report to me, and the functions are largely concentrated in two locations: Malaysia for APAC customers, and domestic for Americas. EMEA coverage is split between the two.
- “Prior to outsourcing AR and collections about seven years ago, AR sat under accounting and credit under treasury. The outsourcing was a disaster—the cost savings didn’t outweigh performance issues like slow collections.
- “We brought AR back in-house about three years ago, moving it to treasury, and later built a team of about 25 in Malaysia, which has delivered excellent results.”
Peer answer 2: “For us, credit and AR processing are regionalized, scaling where possible. Almost all are part of our captive finance company/reporting segment who centrally owns key processes like credit adjudication and most systems.
- “It was not always this way. Up until the early 2000’s, the systems were mostly common but administered by each local unit. Centralizing provided scale to develop the right skillsets and to deploy that knowledge cost effectively. Processing, including collection, is done regionally to enterprise standards (and local requirements).”
Peer answer 3: “I’m setting up an AR team now, but my prior experience may help. I was leading the customer finance team, which was responsible for customer financing (credit assessment, setup and management), and AR & bad debt calculations. I reported to the treasurer. Needless to say, the job in the U.S. was the easiest as the customers were the third-party logistics providers.
- “The international teams’ work was way more complicated. I still very vividly remember our debates with auditors about bad debt reserve calculations for Spain and Italy where AR aging was 1.5 years+.
- “Each region had/has its own AR centralized function within shared services but reported to the global/region customer finance lead, who reports to the treasurer.”
Peer answer 4: “Most recently, AR became part of the accounting department as it was determined that their functions more closely match with accounting. The credit and collections (C&C) department continues to be part of the treasury organization and is responsible for all collection activity, bad debt reserve calculation, credit reviews and setting of customer credit limits.
- “Customer outreach for overdue invoices is only done by C&C. Since C&C has direct access to the customer and their credit file, they are in the best position to determine reserve requirements and bad debt write-offs, if necessary.
- “Credit department staff is split between U.S. and Ireland to align with our customer and sales team location. The C&C department operates under a common procedure and has a global leader in the U.S.”
Peer answer 5: “The AR function sits within corporate accounting, including credit review and setting credit limits.”
Peer answer 6: “The shared services function (which includes AR, AP, collections and travel) sits under the corporate controller so everything is centralized.”
Peer answer 7: “We consolidated into an order-to-cash model about a year after I joined. We moved credit and cash application responsibilities out of treasury to focus on end-to-end process ownership. Our global OTC leader sits in Ireland with direct reports both in Ireland and our U.S. HQ.”
