A company’s financial health is determined by its cash flow. Meanwhile, cash flow is determined by your ability to get paid fast. So, it’s obvious that a steady cash flow and the financial well-being of your company are directly related.
Therefore, your company must have a strategy in place to encourage timely invoice payment. For certain companies, accounts receivable management will be enough. For others, the services of a debt collection agency might be needed. Both strategies have varied elements and are used based on specific factors that we shall discuss in this article.
Accounts Receivable (A/R) Management: Key Components and Benefits
A/R is the fundamental part of accounting in business. It represents money owed by customers for services or goods provided on credit. Receivables collection is the main component of A/R management. It has various parts that can be automated to facilitate the process of collection. These include:
- Streamlined process: You can customize workflows for a wide range of customers based on various industries. This way, you can proactively manage invoices, ensuring receivables are paid in a timely fashion.
- Simplified credit management: With an established streamlined process, the capacity to centralize data in one place becomes possible. This allows businesses to make fast decisions about customer credit.
- Efficient and swift payment reconciliation: Invoices and payments should be accurately matched to various banks. This ensures your business has a concise understanding of its cash flow.
- Easy and quick payment gateway: To make the payment process easier for customers, it should include options.
- Dispute resolution: Generally, customer disputes involve a long, manual process involving cooperation between various departments and roles in the company. A/R management provides a process that reduces bottlenecks and improves visibility when it comes to dispute resolution.
Professional Debt Recovery Services: Key Components and Benefits
Depending on the timeframe, payment cycle, and industry, receivables can become debt. More proactive methods are now required since the invoice is overdue. Companies turn to debt collection agencies when they have exhausted all methods for timely invoice collection.
Fundamental components of debt collections include:
- Identifying overdue accounts: Certain accounts, such as those with high payment risk or those with the most debt, will require help from a collection agency. This component depends on the debt collection service to have visibility into accounts, so information such as owed amount and aging reports can be viewed.
- Deciding between write-off and collections: Accounts are considered severely delinquent if the due date on their invoices is 60 to 90 days past. In such situations, your A/R department can no longer waste resources on collecting the debt. You have to seek debt recovery services in Houston.
- Legal action: This is the last resort. If you or the services you hire cannot collect the debt owed, you have to take your customer to court.
In-house or Outsource: What do you choose?
In-house management provides complete control over the method. However, most commercial debt collection agencies in Houston, such as Nelson, Cooper & Ortiz, LLC, will customize their processes accordingly.
Now, depending on the timeframe, you have to decide what you should do. Let us look at some of the deciding factors:
- Waste of resources and time: As a business owner, you will face a moment when you realise flexible payments, customized workflows, and dispute management fail when collecting invoices. When these methods don’t work, it’s time to bring in the experts.
- Preserving customer relationships: Many businesses aren’t sure about outsourcing their debt collection because they think debt collection agencies only hire burly men to knock sense (literally) into their customers. This is far from the truth. Most debt collection agencies ensure their processes don’t ruin the relationship between you and your customers.
- Collection agencies have a proven track record: Proactive A/R management processes might only work on some of your customers. The outstanding dues are a lot tougher to collect from other customers. Here, a debt collection agency has a specialization in. They capitalize on their experience with the latter set of customers and thrive in invoice collection.
The world of business is bustling, and the account receivables management is more than a task. It’s the necessity that keeps your cash flow healthy. Whether you use in-house processes or outsource them, make your choice wisely!