In the same way accountants become trusted financial advisors, a third-party debt collection agency can become a go-to resource to improve your cash flow.
Professional accountants know first-hand that their roles are about much more than just tax season. Accountants help keep cash flowing in the modern business, becoming the trusted advisor to CEOs seeking financial advice.
But how do accountants and CPAs keep the cash flowing in their own businesses? Past due A/R affects the accounting business in the same way it affects every other type of company. The problem is that, while we may think of the “big four” accounting firms first, 90% of all accounting firms have less than 10 partners. That means most accounting firms in the U.S. are small-to-mid-size businesses (SMBs).
That also means that internal resources are often spread thin. Just like any business, it’s likely that past due accounts are DIY – meaning, an internal manager may wear several hats that include collecting on past due receivables. But just like any small business, there is usually less margin to handle late payments to the firm.
So, is trusting debt collections to an internal team really as effective as hiring a professional? When should a small accounting firm call on a professional debt collections resource? How can a collections agency help the small accounting firm keep cash flowing?
Why Should Accountants Consider a Debt Collection Agency?
The general rule is that you should only hire a collection agency when a debtor is ignoring the debt. When this is the case, don’t hesitate to hire a collector because the probability of collections decrease 12% each month an invoice remains outstanding.
Hiring a professional debt collections firm makes sense for the small accounting firm. Online collection agencies such as Rocket Receivables have high ROI at an affordable price and are geared specifically to fit SMBs.
But what kind of ROI can collection firms provide? Ernst & Young, one of the biggest accounting firms in the nation, conducted a study called The Impact of Third-Party Debt Collection on the US National and State Economies in 2016. They found that the commercial collection agency industry:
- Collected $785 billion in total debt in 2016.
- Of this number, 71% were receivables that were aged 90 days or more.
The longer a debt goes uncollected the harder it is to recover.
Both of these statistics illustrate the first two points in our list of three ways professional debt collection firms can help accountants.
- First, it’s clear that a collection agency can do one important thing for your firm – bring in past due A/R. In this way, credit collection services pay for themselves.
- Second, note that debt collection firms can do what you often cannot – bring in the severely past due account. The longer a debt remains uncollected, the harder it is to recover it.
- The third reason to consider a debt collection agency is that these firms save your internal teams time. As the third-party debt collection firm brings in past due accounts, they also help with cash flow. Rocket Receivables is focused on one thing – collections – we have honed our skills to become more effective.
There is no reason for your accounting firm to struggle with past due A/R. Rocket Receivables has a proven methodology that we leverage to improve your cash flow. Now that tax season is over, it’s time to talk with Rocket Receivables to find out how we can help your bottom line. Contact us to request additional information.