Positive cash flow means cleaning up your accounts receivable (A/R).
Whether you are an enterprise-level CFO or a small business owner, you live by one hard and fast rule: Maintaining positive cash flow requires lessening the volume of past due accounts.
The tactics and tools you use to recover these debts will increase the likelihood that you will get paid, whether your receivables are $2,000 or $2 million. If you’re just starting out in business, we can share what most enterprise-level CFOs already know: Managing B2B collections as an in-house process is extremely difficult.
Fortunately, outsourcing debt recovery to a third-party has never been easier
Debt Recovery Agency – A Commercial Collections Resource
It’s a safe assumption that many types of businesses simply aren’t effective in their approach to commercial collections. Debt recovery is just as difficult as being able to reconcile who has paid across the accounts receivable process. The federal, state and local compliance rules vary, making for an unwieldy process that is difficult to effectively implement without suffering heavy penalties. On top of all this, throughout debt recovery, the business must strive to maintain client relationships.
A professional collection agency drives efficiencies by using the latest technologies, along with applying compliance-savvy proven best practices. When done properly the collection agency will act as an arm of your business. They understand the B2B psychology that allows them to play good cop – by maintaining a customer service relationship with a past due client – and bad cop, by taking the heat that comes from pressuring a client to respond to a past due balance.
A commercial collection agency also has technology on-hand that small businesses can’t afford. While enterprise organizations may have the same data management systems, outsourcing collections allow them to eliminate the overhead that comes from in-house debt recovery.
For example, collection agencies can troll through quantitative and qualitative data in an A/R client portfolio and use predictive analytics to help distinguish the likelihood of payment by account. This allows the debt recovery service to impact your past due balances more quickly. Business intelligence platforms can look for trends in portfolios, which makes for smarter efforts by collection teams to bring in the highest volume of revenue more quickly. All of these tools help streamline and improve B2B collections, cleaning up your aged balance in a systematic and successful way.
Outsourcing B2B collections cleans up your A/R systematically and professionally.
When should businesses seek to outsource B2B collections?
- When receivables are negatively affecting cash flow
- After a merger or acquisition that brings in an influx of A/R
- When they don’t have the staff to handle the A/R
- When they want to reduce fixed operating expenses and improve cash flow
- When they need to ramp up temporarily to reduce days sales outstanding (DSO)
- When the in-house collection team is ineffective or when the business does not have an in-house collection team
What are some of the benefits of A/R outsourcing?
- Increased cash flow
- Reduced days sales outstanding
- Higher profits
- Improving how quickly past due accounts are worked
- Improving customer service and customer communication
- Reducing the internal costs of conducting collections by eliminating overhead
To find out more about how outsourcing debt recovery to an outside resource could help your bottom line, contact us.