Tips on How to Improve Your Average Days of accounts Receivables Collecting
One of the greatest challenges facing businesses these days is timely collection of accounts receivables. For various reasons, some customers and debtors do not pay in time, and may even have no plans of doing so. You can’t say that won’t sell on credit because doing so may seriously affect your business and even you may not be able to meet sales targets.
Many businesses transactions involve taking or issuing goods or services on credit and then paying later. Because you offered services or supplied goods to them, if they don’t pay it means that your business will incur loss in financial terms. A collection agency can help improve the collection by following payments from non paying customers.
To increase the chances of success in recovering accounts receivables, you should make wise choice with the collector and ensure that you work collaboratively with them. Businesses must learn the process of collection should not begin late, a time when accounts are long overdue. Instead, the process of collection should begin at intake by client.
In conjunction with the client intake methods and the processes of billing, the person responsible for the collection of accounts receivables in an organisation should have the necessary action plan, tools, and support required so as to be effective. Without an effective system of collection of accounts receivables, an organization is likely to run in to serious cash flow problems.
The golden rule with regard to the collection of accounts receivables is that; the longer an overdue account receivable remains unpaid, the slimmer the probability of it being collected. Do not wait until the time when accounts are many months overdue so as to engage a collection agency.
The relationship with your collection agency should not be a one time affair but a long term relationship. When you feel that a particular accounts has become long overdue and the chances of the customer or client paying in time are decreasing, let them do the work. In collecting accounts receivable, a collection agency must adhere to the industry practice as well as the relevant consumer protection rules and regulations.
Being an agent of the business, some of the actions of the collector bind the business owner. Thus, the relevant laws and procedures must be followed during the process of recovery so as to avoid litigation and other legal action that may occur if it’s not done properly. Let the collection agency know your credit policy, as well as the time when debtors and customers who have been given goods on credit should pay. Also let the collection agency know the content and provisions of your accounts receivables collection policy, and then provide them with the tools necessary for the effective implementation of that policy.
The ability of recovering accounts receivables varies from one collection agency to the other so you need to carry out research and identify one that offer the highest quality service at affordable cost. In choosing, special consideration should be paid to not just the rate percentage that the collector takes, but also the amount they recover. If the collector recovers more money at relatively higher rate, then it will be more beneficial for the business because it will also receive more money.