The single largest liquid asset of a company is their accounts receivable (A/R).
Kind of goes without saying, right?
And yet, because the valuation of your company and its credit worthiness is tied to A/R, it is critical for business owners to keep a close eye on this aspect of their business.
So the question is…
How do you account for uncollected debts?
There are three widely accepted methods:
- % of ending A/R
- % of credit sales
- % of aging A/R
The first is Percentage of Ending A/R. This is the percentage at the end of a sales cycle that is estimated will not be collected.
The second is Percentage of Credit Sales based on historical data of past sales and A/R paid.
And the third method is the Percentage of Aging Accounts Receivable based on the default percentage calculated on aging relative to payment. This method is considered to be the most reliable.
By paying close attention to your aging accounts you can develop a sense when an account is headed for collection.
1. Handle collections in-house?
If you handle past due accounts in house always send past due notices promptly and communicate with businesses that owe you money. It is more likely that you’ll be paid if you have a working relationship that is not adversarial in nature.
Never harass, be direct and listen.
Often your former customer or client might be going through a tough financial patch and has every intention to pay. Offer solutions to your customers and be creative. Remember to write the demand letter.
You might consider offering a one-time discount so your customer can catch up.
After all, once a debt is written off it is generally much harder to collect.
Finally, make sure you follow ALL collection laws that apply to your state, as well as the state(s) for your customers or clients.
Managing and collecting on A/R is key to the profitability and survival of your business.
So when is it time to get some outside help?
2. Three factors regarding B2B collections
Partnering with a good collection agency early on may be a good business strategy.
For starters, it frees up wasted staff hours spent sending out 2nd, 3rd and final notices to your former customer or clients, not to mention time spent making follow up calls.
Let’s face it, your staff doesn’t like to do this for you — and they better serve your company by focusing their efforts on the job for which they were hired.
When looking for an agency make sure you understand their methods of collection:
- frequency of calls
- demand letters
- the percentage of money they recover
Knowing these factors will give you a good idea of how successful their methods might be when it comes to collecting on your behalf. You’ll especially want to ask about their track record for working with a business such as yours, since this will provide you with a good estimation regarding the percentage of revenue to be recovered.
And always make sure you hire companies that are licensed for your state AND the state(s) where your customers are located.
Successful debt collection has everything to do with the company you hire.
Make sure you select a specialist who has some detailed information about your type of business AND who can demonstrate a track record of successful collections working with a company such as yours.
After all, that’s why you’re turning to an outside agency in the first place, isn’t it?
Find a business debt collection agency
To find the right collection agency for your business click the link below and get your free quotes from qualified and reputable companies…
Click the link and compare free collection agency quotes today.
After all, you really only have two choices:
- you can keep doing what you’re doing (and hope for a different result), or
- you can hire an outside company and collect the money you rightfully deserve.
Use the link above for your free quotes, or click to find commercial collection agencies for your State or Metro area that can help you recover lost revenue starting today.
It’s your money… you decide.