It’s the moment every business owner dreads — you check your accounts receivable and realize you have outstanding debts that won’t budge.
You’ve tried everything from sending reminders to making phone calls, but nothing seems to work. Meanwhile, your cash flow is suffering, and you’re struggling to keep up with your bills and expenses.
But what if there was a way to recover those outstanding debts and improve your cash flow?
Turning over your accounts receivable to a collections agency may be the solution you’ve been searching for.
5 Ways Outsourcing to Collections Can Help Improve Your Cash Flow
Running a business is hard enough without the added stress of chasing down payments from customers who just won’t pay up. If you want to avoid the headache of debt collection, outsourcing to a reliable collector can help your cash flow problems. Let’s explore why it can be a game changer for your cash flow problems.
Increased Cash Reserves
Picture this: you’re a business owner, and you’ve been waiting for weeks, maybe even months, for a payment from a customer. You’ve sent reminders, made phone calls, and even sent emails, but nothing seems to work. Meanwhile, your cash flow is suffering, and you’re struggling to keep up with your own bills and expenses. But what if there was a way to recover those outstanding debts and improve your financial position? That’s where outsourcing your accounts receivable to a collections agency comes in.
By outsourcing your debt collection, you can recover outstanding debts more quickly and efficiently, which can help you increase your cash reserves and improve your overall financial position. This is because the faster you can recover outstanding debts, the more cash you’ll have to invest into your business, pay your bills and expenses, and weather unexpected expenses or downturns in the market.
Plus, increased cash reserves can help you take advantage of new opportunities or invest in growth initiatives to help your business thrive. But perhaps the most crucial benefit of having increased cash reserves is the peace of mind knowing you have a financial cushion to fall back on.
Strengthen Your Financial Position
Turning over accounts receivable to a collections agency can significantly impact a business’s cash flow. According to a study by Xero, 9 in 10 small companies experience at least a month of negative cash flow each year. This means that small businesses struggle at least once a year to access the funds they need to meet their financial obligations and invest in growth opportunities.
And one of the major hindrances between businesses and their cash flow problems is the money held up in account receivable. If companies can recover their outstanding debts, it would significantly help them to get their feet back on the ground. This is where outsourcing your account receivables helps immensely.
Reduced Administrative Burden
When a business outsourced debt collection to a collections agency, they essentially hand over the responsibility of collecting the debt to a third party. This means that the business no longer has to spend time and resources chasing down debtors and trying to recover unpaid debts. Instead, they can focus on other vital areas of their operations.
In addition, outsourcing debt collection can help businesses reduce their overhead costs. This is because hiring and training staff to handle debt collection in-house can be expensive and time-consuming. By outsourcing this task to a collections agency, businesses can avoid these costs and focus on other vital areas of their operations.
Furthermore, collection agencies have specialized software and technology to help them manage debt collection more efficiently. They use automated systems to track and manage accounts, which can help them recover debts more quickly and efficiently. This can help businesses save time and resources, as they no longer have to manage the debt collection process.
Reduced Bad Debt Write-Offs
When a customer fails to pay their debt, it can become a bad debt if it remains outstanding for too long. Bad debts are unlikely to be paid off, so they need to be written off as a loss on the company’s financial statements. Writing off bad debts can significantly impact a company’s cash flow because it reduces the amount of money the company has available to invest in growth initiatives or, in some cases, pay bills and manage expenses.
By outsourcing your accounts receivable to a collections agency, you can reduce the likelihood of bad debt write-offs. Collections agencies have specialized tools and expertise that can help them recover outstanding debts more quickly and efficiently. This means they can help you recover debts before they become uncollectible and must be written off as bad debt.
Stay Compliant with the Regulations
Collection agencies are well-versed in the legal requirements surrounding debt collection. Letting a collection agency manage account receivables can help businesses comply with all relevant laws and regulations.
Collection agencies also have specialized knowledge of debt collection laws and regulations, which can help them recover debts while staying within the bounds of the law. They understand the Fair Debt Collection Practices Act (FDCPA), The Federal Claims Collection Standards and other relevant laws and regulations, which can help them avoid legal issues and protect the business’s reputation.
Want to ease the burden of accounts receivable and increase your cash flow? Call us at 470-297-1120 to talk to one of our debt collection experts today to chalk out a recovery strategy.