Debt Collection for Business Owners: Some Facts about Life
If you’ve started or grown a small business, you know how vital it is to keep your cash flow positive and well-managed. All business owners understand there is a constant need for new working capital to help with such cash drains as financing inventory, additional staff and equipment, and growing accounts receivable. Because of these pressures, debt collection is an important priority for every small business.
You know that you must often extend credit lines to get new customers and your existing customers often need additional credit as they grow with you. However, as your accounts receivable grow, you also know that sales aren’t profits until that money is in the bank. Your standard collection procedures will often require you to deal with customers who pay late, and that process can present special challenges.
Getting Help from Debt Professionals
Many business owners learn about the challenges and facts of receivables management the hard way. Keeping your accounts receivables current takes proactive management and you must be aware of how to do that effectively and legally. Keeping a low Days Sales Outstanding often requires the help of a professional firm and the reasons for this need include:
Fact: It is often difficult to collect the debt and keep the customer.
Fellow business owners understand they have to pay their bills; there is a proper way to remind the customer of past due debts without offending them. Likewise, there are time-proven methods for escalating your demands in a non-threatening and professional manner. When situations get to the point in which the debt is interfering with the relationship, the right collection firm process can guide you to make proper business decisions and give you a solid foundation
Fact: The economics of collecting debts must make sense.
If you wait until a debt is so large or so old that it requires an attorney, you may end up with nothing to show for the effort. On the other hand, you can work with a professional firm that has scalable services and uses the most cost-effective methods in the collection process. The key to success in managing your DSO is avoiding the expense of legal fees and keeping your invoices paid in a timely manner.
Fact: There are a lot of rules, laws and regulations concerning proper debt collection.
If you haven’t encountered them before, you may be surprised at the large number of legal and regulatory issues related to the collection of debts. However, while it is essential to remain compliant with all these requirements, you don’t necessarily need the expense of a lawyer to do so. Professional collection firms work hard to stay up to date on all regulations and will help you stay compliant while effectively pursuing late and delinquent accounts.
Fact: You make more by generating sales than collecting debts.
Let’s face it – you didn’t get into business to act as a debt collector. You’re good at what you do and succeed by beating your competition. While your cash flow is essential to that continued success, you’re undoubtedly better at getting and servicing new customers than you are at collecting from them. Firms that specialize in debt collections work the same way. Good collection agencies focus on being efficient and successful resources to you by keeping your current A/R effectively managed better than in house staff.
When it comes to this aspect of your cash flow, take time to get the peace of mind you need and deserve. Instead of dreading the monthly review of your accounts receivables and DSO, use a professional to produce that monthly report to show how each slow or delinquent account is being proactively managed.
