Large corporations and lenders
These are obviously going to accrue obscene amounts of accounts receivable and bad debt. An average of 18% of all A/R debt is past due nationally at any given time. It's just a factored in "cost of doing business" for them. So for nice round numbers, if they invoiced for 100 million dollars in any given year, 18 million dollars are past due and at risk of loss. They'll have an in house collection department who will go after past due balances through 120 days past due.
Once they go past that point they get shipped out to a debt collection agency by the hundreds, or even tens of thousands of accounts monthly. While non-payment can bankrupt even the largest corporations, they have many options even beyond collections to factor or eventually sell off some of their bad debt.
Having been a contractor and collection consultant for many such large Corporations for almost a decade I can tell you that while there is always room for improvement on even their bottom lines, they don't really FEEL the pain of non-payment like the little guys do.
It's been my experience that mid-sized companies try to operate like big companies when it comes to dealing with accounts receivable and collections, and sometimes that can work. While they do have the ability to use a similar strategy, and also have a few more customized options to protect from losses, they are typically missing a good chunk of profit recovery in a way that, fittingly, is right in between Large Corporations and Small businesses.
They often aren't using the proper overall strategy. Many times they have an ill-equipped collections staff that just isn't effective enough, and then don't outsource what's not recovered; in other words give up too quickly. They have low wage, inexperienced employees as "collection specialists" who are actually just taking up unnecessary resources, sq. footage, and expense for something they could outsource at a fraction of the cost; all while decreasing risk and increasing profit.
One very common mistake in this sector is having members of the accounting or sales team make collection calls (this goes for small businesses too!). These people already have jobs to do and have no idea the many different factors at play in recovering past due balances successfully. Not to mention they interact with these customers and need to keep a great rapport with them, no need to make it awkward for either party.
You have to take a step back, look at the big picture, and then set your processes in a finely tuned way that fits your organization's specific situation. Many times something important is not being done at all, or things are being done in the wrong order. Have you scrutinized your cash flow maximization?
The bottom line remains, whatever your current process, if you have any losses in a given year, you could benefit from a professional collection strategy. My experience allows me to see this crucial aspect of cash flow in a unique and valuable way. If you have questions, or want a quick diagnostic, contact me directly. I am also still actively consulting on these matters.
Small business and Freelancers
Many small businesses look like bigger businesses. Depending on your industry, number of employees, and annual sales, the lines are often blurry between small-mid sized businesses and corporations. For the purpose of this section, when I talk about small businesses, I refer mainly to those with less than 100 employees that generate up to $21 million in sales. That includes all the one man shows and freelancers as well!
This is a sector we focus on heavily. The reason we do is that we believe in small business and everything it stands for for this country, for individuals and families, communities, and also because they need us the most. Some of these are too small to have any type of credit approval process, they don't have the time or resources to deal with collections correctly and effectively.
They often fall victim to or are prayed upon by other small businesses, start ups, or large corporations who essentially feel they have the right to walk all over these hard working entities. Contracts, invoicing procedures, and collection resources are often struggling in this sector. Unfortunately those are things that you cannot ignore when you count on every dollar from every job to pay the bills and grow your business; if not just maintain.
When a small business owner has past due balances, and are getting ignored when it comes time for payment, they often give up or get emotional about the situation. Many times this prompts an improper response, or one that hinders your ability to make the best possible resolution. They may think of collections as some mysterious or devious process that may hurt their reputation, and that's just not the case.
Large collection agencies either won't accept single or small batch placements, or they'll accept them but make lackluster attempts to collect, then give up too quickly. All these factors leave you frustrated, wasting time/money, and many times just plain going out of business.
Whether you have a hoard of accounts receivable skeletons in your closet or stumble across one non-payer a year, a specialized, professional, collection firm like ours can be your secret weapon! You did the work, you deserve to get paid. We gather all the pertinent details and examine each non-payment situation in detail. We then use our experience to save you time and money by taking on the responsibility of putting money back in your account where it belongs.
Depending on your industry, the average days delinquent, average balance size and staffing, there are a myriad of factors that must be analyzed to determine exactly what your best strategy is to increased your access to earned income, and simply minimize losses.
Doing the right things on your own from start to finish, and then knowing when to say when and contact a professional, will ensure you don't end the year with a dusty file of profit loss. We can help you with both of those crucial steps. All the best accounting software, apps, invoicing systems, and accountants won't help with the inevitable non-payment situations that require the knowledge, deep experience, and hands on leverage we can provide your business.
A strong and professional cash flow management ally like Cambridge Receivable Solutions will make sure that you are recovering every possible dollar in the most cost effective way possible. You will never have less for having us on your side. All of our services are either No Recovery=No Fee (Contingency) or offer an easy to notice return on investment. Keep us on speed dial.
Contact the Author:
President & Principal Consultant
Cambridge Receivable Solutions, LLC
Toll Free: 1-888-908-3905 Ext.101
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