When hiring someone to manage accounts receivable and collections, you're effectively putting your business in their hands. Think about it. If you need to ensure payroll and other business expenses are paid, you need working capital. The best way to gain working capital is to improve DSO (days sales outstanding) or the amount of time it takes to collect from credit sales. And the job of collections and accounts receivable specialists is to get those sales invoices paid.
Employers are struggling with finding workers even though COVID restrictions are being lifted across the country. According to a recent report, 42% of small business owners were unable to fill job openings and 91% were unable to find qualified applicants. These challenges are also affecting the work that's getting done within businesses too.
It's so frustrating when unpaid invoices are piling up, even after you've called, emailed and sent friendly reminders. At this point, many businesses will simply write off the invoices as bad debt and move on. If you've taken on too much bad debt or let far too many invoices go unpaid, it's time to bring in the professionals. Let us remove the hesitation and complexity of it all.
If your business has sent bad debt accounts off to a collections agency, you likely have questions about recovering that debt. Typically, commercial collections agencies only charge a fee if they're able to collect. The agency should also be transparent about the collections process and the documentation along the way. But you may also be wondering how long they'll work on your behalf before you take the case to court.
Chasing down an unpaid invoice can take away time and resources that could be better served elsewhere in your business. It's important to understand when and how to follow-up on invoices. Obviously you don't want to appear too needy but you don't want your clients getting away with paying late or not at all, either. And when should you get help from a professional collections service?
If you've agreed to contract with another business, you are providing valuable products and services that benefit their company's success. Likewise, their payment to your business is cash flow that keeps your company running smoothly. When your business fulfills its obligation but your client doesn't pay, it could sour the relationship and put your cash flow at risk. There are steps that your business can take to ensure payment prior to taking legal action. Or you can work with an professional agency that takes these steps with you.
The internet allows for businesses to sell the use of software (and hardware) and revenue is collected either yearly or monthly as a subscription service. The as-a-service or subscription business model is sustainable as long as payments are received. Because client retention is very important to this business model, debt collections must be handled with business relationships in mind.
In the age of social media and rapid-fire news stories, it's important for businesses to consider their brand reputation. If your accounting team outsources its bad debt or unpaid receivables to a collections agency, it's also important to protect your brand. Quite simply, a negative experience with a collections company could sour business relationships and your branding.
Just like when any relationship turns sour, you're left dealing with the things you couldn't agree on. Unfortunately, when your good business clients refuse to pay or communicate, it may be time to bring in a mediator to ensure your assets are protected and your agreement holds up. Whether you've decided to escalate their continued late payments, write off their account as bad debt or pursue litigation, you don't have to do it alone.
No matter the type or size of your business, accounts receivable and collections is a valuable part of your operations and cash flow. B2B (business-to-business) accounts receivable and collections, however, is very different than B2C (business-to-consumer) for a number of reasons. In this post, we will uncover the differences between these two types of businesses and how their receivables and collections processes are different.
