4. Allocate your finite resources efficiently
There are plenty of textile companies that view their accounts receivable as a cost centre or an afterthought, and therefore, do not commit enough resources to optimise it. This shortage of capacity impairs debt recovery, causes more bad debts and declining profitability that ultimately makes resources scarcer. To avoid this vicious circle and to employ the three strategies above successfully, you need to play your resource cards right.
The first and plausibly most important card is you. When you withstand short-term pressures and set your sights on long-term solutions and benefits, you can make informed decisions to enhance your accounts receivable management undoubtedly. The second card could come across as a natural action point for textile companies. However, seeing that a lot of companies still not having the right setup in place, it is worth mentioning that you can boost the efficiency of your current accounts receivable process by automation as much as possible. From invoicing and billing to reporting and debt recovery, the more you automate them and have them work in sync with each other, the more administrative workloads you ease and the more control you gain.
The third and arguably most underused card is engaging a debt collections agency as a strategic partner in time to do the heavy lifting of collecting outstanding receivables. There is only so much that your team, plus or minus automation, can do on a daily basis. Based on the Pareto principle, it is much practical to focus on 20% of the outstanding accounts receivable while leaving the remaining 80% to a strategic partner that can bring the much-needed diligence as well as experience and textile to the table. This does not only ensure the productivity of your accounts receivable, but also enrich your existing organisation. A capable debt collections agency can dovetail their strategies, approaches, and reports with yours, maximising the collected amounts and making certain that your business relationships and reputation remain intact.
To get the best results from optimising your accounts receivable management with a strategic partner, you need to time their involvement well. Cost-effectiveness can be achieved by having a debt collections agency work on your outstanding receivables early, when your team have not made a move yet or made some attempts to collect, but to no avail. The agency can then take over and free your time and resources up for other pressing tasks.
Distributing and committing resources strategically to managing your accounts receivable will help you reduce bad debts and unlock cash trapped on your balance sheet. It could be an uphill battle, but you can always obtain external help to fight alongside and to share the same goal of increasing your company's liquidity and profitability.
Having a structured, regularly updated oversight of the creditworthiness and payment behaviour of your customers gives you an instant idea of the composition of your accounts receivable portfolio, where cash flow is held up, and what courses of action you could take to improve it.