4.Expand your collections capacity
4.Expand your collections capacity
On one hand, most customers have no issues with paying their suppliers late. They rarely give reasons or explanations for their payment behaviour. On the other hand, most suppliers find late payment a complication. Pressure on margin makes collecting outstanding accounts receivable necessary; however, there are two main obstacles that may hold you back from chasing your customers up.
Fear of ruining the relationships with the customers. This is the number one reason we have seen that causes hesitation in tackling overdue invoices. In the face of fierce competition in the food and beverage sector, sales can be protective of their customer relationships. They could be against you going after the customers for payment.
Lack of time, staff, and other dedicated resources to collect 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, it is difficult to justify the 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, taking and mitigating credit risks, trying to collect some monies to improve your organisation's margins, the sheer volume of overdue invoices keeps increasing. It becomes tougher to allocate the right resource and implement the right approach for each of your outstanding invoices. It is probably time to augment your collections power.
Collaborating with collections experts could daunt at first. However, more and more food and beverage businesses have acknowledged the advantages of having a strategic partnership with debt collections firms.
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.
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 payment, but also mitigate the risk of the outstanding accounts receivable ageing further and becoming bad debts. Besides, there are different pricing structures for debt collections, some of which could depend on the value and the age of the accounts receivable. That means the earlier you engage a debt collections partner with your accounts receivable, the more cost-effective it is and the higher the chance your margins are improved.
You save a great deal of time, which is also money
A debt collections partner with specialist expertise has honed their collections approaches, making them highly efficient and rigorous when it comes to committing the necessary time and resources to each individual overdue invoice.
They can save you even more time if 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 multiple outstanding accounts receivable in different countries.
You have more control over how your accounts receivable are collected
And maintain your hold on them. Working with a strategic debt collections partner means making them an integral part of your credit control and collections process. Especially when they have a credit management background, they complement and enhance your in-house collections activities greatly.
Liaising with you, your team, and sales, the debt collections partner can assess each outstanding account receivable and devise the best approaches to collecting it. Whether it is dispute handling, calling, or sending collection letters, the debt collections partner's position as the expert and professional 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 all of 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 the customers. With your consent, they can initiate legal action on your behalf and support you throughout the whole process.
To deal with a huge volume of outstanding accounts receivable, you will need a collections system that is structured, meticulous, yet flexible, and probably some extra pairs of hands. The combined efforts will help enforce strong credit policy and sound accounts receivable management practices. That does not only improve your accounts receivable ledgers but also contribute to strong trade relationships with desirable payment behaviour.