Dr. Anderson, a local dentist, is considering reducing his office staff and outsourcing the management of his accounts receivable. Currently, he has an office manager and two part-time workers on his staff. It takes one part-time employee almost 100 percent of her time to send out billing notices and follow up on collections. Even then, Dr. Anderson is able to collect on only about 80 percent of the receivables. A collection agency wants Dr. Anderson's business. It will handle all billing and collection details for a monthly fee of $\$ 1,500$. The agency believes it can deliver a 90 percent collection of receivables. Another firm, We Collect, Inc., has approached Anderson with a proposal that would shift all accounts receivable risk to We Collect, Inc. Anderson would receive 85 percent of all receivables automatically. Additional information follows.

Anderson's average yearly accounts receivable $\$ 400,000$

Anderson's average annual bad debt expense ..... 80,000 Part-time accounts receivable employee salary ..... 12,000 Which of the following alternatives should Anderson pursue concerning his accounts receivable?

1. Maintain status quo (part-time employee handling accounts receivable).

2. Outsource to collection agency.

3. Outsource to We Collect, Inc.