It is a Race Against Time with Business Debt Collection of Accounts Receivables!
One of the most challenging issues facing the back office of any business is the efficient collection of accounts receivable. Business debt collection is like a trip to the dentist – necessary, but definitely not fun.
The thing is that profits are realized only from paid sales. Until the payment is received, it is simply someone’s opinion that the money will eventually go into your company’s checking account. An expression I like to use, “Profit is opinion – cash is fact” applies here. The sale is a key event, but it is not “high-five time” until the money is collected.
The problem is that when it comes to receivable collections, you are in a race against time. Receivables are like produce. Just as lettuce loses value the longer it sits on the shelf, the longer an account goes unpaid the more likely it is that you won’t collect the money. The older it gets, the more likely it becomes that it will eventually come off your balance sheet as a direct hit to profit on the bad debt expense line.
Please don’t let your people procrastinate on this. The fact is that more businesses fail for lack of cash than for want of profit, making it most important that everyone in your organization is in full agreement that the sale is not finished until the money is collected.
Hopefully everyone in your organization agrees that putting money into the company’s checking account is the purpose of all sales activity and everyone is on board with good collection processes, including the most important element, the strict application of good procedures in granting of credit privileges.
Once you cross the threshold of actually giving a customer a receivable account, successfully managing them requires:
- Prompt billing
- Good collection letters and phone scripts
- Knowing when to quit working troubled accounts
Today’s business world places customers in the highest regard with their satisfaction and retention the prime element of success. Building a loyal customer base with quality products and services and attention to their needs has become the common strategy for staying competitive in the business world. Without satisfied customers there would be no one to purchase our products and services. But, in my opinion the term “customer” is really incomplete – the correct phrase should be “paying customer.”
Please consider a simple fact: a customer is not a customer until the money is in the bank.
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