Question? What is your current 12 month rolling recovery rate with your collection agencies and could it be better in 2015.
Good News! You can increase your results substantially in 2015 by making tough decisions in November.
During this busy holiday time, many companies delay placing accounts with agencies until the first of the year. There are several reasons for this:
1. The client is busy with year-end audit preparation,
2. The client has staff members taking more holidays than usual,
3. The client believes that it is more prudent not to ask for money during the holidays,
4. The client has placed bad debt placement as a low priority in relation to other priorities.
Here are several reasons why you should accelerate year end placements now:
1. Most small business commercial debtors use cash accounting and can be motivated to pay their debts before the end of the year to minimize taxes,
2. Payables on the balance sheet can have an adverse impact on a company’s’ ability to get credit or bonding. The agency collector explains the benefits of cleaning up the balance sheet before year-end to the debtor in November and December. Obtaining credit is critical to all small businesses.
3. Although many consumers are challenged with paying off their debts at the end of the year because of the holidays, the agency has time to get them on a small payment arrangement with a balloon payment due at the time they obtain their tax refund in February,
4. The more time your agency has to locate and communicate with your consumer debtors before February, the better your results will be for the entire year.
5. Some commercial debtors (even larger companies) delay payment for cash flow purposes until the account is placed with a third party agency for collection or the customer threatens to stop selling them on credit terms,
6. Having a consistent process in place ensures compliance with internal and external audit procedures like SOX,
7. Your customers will know that you are efficient and concerned about receiving payment on time,
8. You will receive consistent results from your agency without fluctuations due to age,
9. When you analyze the month by month batch track results of your agency, you will be evaluating “apples to apples”. Each batch is consistent in age and therefore each batch should liquidate at similar levels over time. This allows you to make better projections of your eventual success.
Placing your accounts for collection in November and not delaying difficult decisions can pay big dividends. Happy Holidays.