3. Allocate resources for collections efficiently
3. Allocate resources for collections efficiently
Pressure on margin makes collecting outstanding accounts receivable necessary. All technology companies want to recover their debts as much as possible, but refrain from doing so due to two main obstacles:
• Fear of ruining the relationships with the customers. This is the number one reason we have seen that causes stagnation in tackling overdue invoices. In the face of fierce competition in the technology sector, sales can be protective of their customer relationships and against you going after the customers for payment. • Lack of time, staff, and other resources dedicated to collecting a large number of overdue invoices. Even when you manage to overcome sales' opposition, there is another comparable hurdle called resources. Because collecting outstanding accounts receivable is time-intensive and never-ending, the number of staff required to manage them on a day-to-day basis is huge. Besides, it is difficult to justify resources to just chase after invoices, especially those that are long overdue at the expense of those that are just past due.
While you are in between sales and unresponsive customers, trying to mitigate credit risks and collect monies to improve your company's margins, the sheer volume of overdue invoices keeps increasing. It becomes tougher and tougher to allocate the right resources and implement the right approach for each of your outstanding invoices. Collections turns into short-term firefighting rather than long-term systematised accounts receivable management. An effective solution to this predicament that can augment your debt recovery power is collaborating with collections experts.
Relying on an external collections agency could daunt at first, but more and more technology companies have acknowledged the advantages of having a strategic partnership with a debt collections firm and regarded them as the backbone of their accounts receivable.
Your organisation's reputation and customer relationships are preserved
contrary to the commonly held assumption that customers would be scared away. The key is to have a strategic partner in collections that specialises in trade accounts receivable and has their own reputation to protect. They would respect your brand and manage your customer relationships with the utmost care as their own.
The costs you save by engaging a debt collections partner outweigh their costs
You not only reduce the staff and overheads needed to chase late payments, but also mitigate the risk of the outstanding accounts receivable becoming bad debts. Besides, there are different pricing structures, some of which could depend on the value and the age of your accounts receivable. That means the earlier you engage a debt collections partner, the more cost-effective it is and the higher the chance your receivables are collected.
You save a great deal of time, which is also money
A debt collections partner with specialist expertise is highly efficient at committing the necessary time and resources to each overdue invoice. Especially when they have a credit management background, they complement and enhance your in-house collections activities greatly. They can save you even more time when they are equipped with adequate technology, making it simple for you to monitor and generate reports on all their collections activities. This proves valuable when you need an overview of what to improve regarding debt recovery and where to do that amongst all the local subsidiaries.
You have more control over how your accounts receivable are collected globally
In addition, you'd be able to maintain your hold on them. Working with a strategic debt collections partner means making them an integral part of your credit management and existing collections processes and systems. Depending on your accounts receivable's composition, you can assign part of or all of your receivables to the collections agency. On the one hand, your accounts receivable staff can switch from reactively collecting outstanding invoices to proactively addressing the main issues underlying major payment delays.
On the other hand, by liaising with you and your teams, the debt collections partner can assess each past due receivable and devise the best approaches to collecting it. Whether it is calling or sending collection letters, the debt collections partner's position as the expert adds considerable weight to the communications, and helps exert the right pressure on your customers.
You get the much-needed expertise in case of litigation
Sometimes you have no other choice but to take legal action against certain customers, who refuse to pay despite your amicable collections efforts. A debt collections partner with legal expertise can advise you on the timelines and costs of such decisions, factoring in the local legal frameworks of the countries of your customers. With your consent, they can initiate legal action on your behalf and support you throughout the entire process.
Successful collections of outstanding accounts receivable helps technology companies maintain healthy cash flow in the short term and weather any downturns in the long term. When you have a huge volume of past due receivables, it is important not to succumb to inertia. You need to develop a collections system that is structured, meticulous, yet flexible, with a focus on efficiency. This can be achieved by collaborating with an external debt collections partner. Such strategic partnership benefits not only the accounts receivable department but also the whole company. With strong credit policy and sound accounts receivable management practices, you can improve the company's margins and make sure that there is sufficient cash to pursue growth opportunities.