Collection business "As Usual..."

With the economy stalled and backing into another year of slow
growth or double dip recession, business managers continue to look for ways to
reduce expenses. 

Yet, cutting back office functions through staff reduction can result in inefficiencies or loss of revenues as more crucial functions are pushed to the breaking point.  Managing an organization’s operation during a time of economic recession can strain existing resources. Back office functions such as collection of
accounts receivable can be forced into near extinction in an effort to
tow-the-line and reduce expenses. 

More astute managers will realize that unless a company can focus sufficient
resources on necessary priorities, such as collections, substantial loss of
revenues will result. So, what is the answer? Cut office functions to the bone
or find a way to reduce expenses while maintaining efficient functioning of
critical back office operations?

For many businesses, particularly small business, what is owed to them, their accounts receivable, is the net profit or “life’s blood” of the operation. Collecting what is due for goods sold and delivered or services rendered, in the recent past,
is the difference between success and failure.  Accomplishing this task in the shortest period of time is paramount to making the business function successfully.

Analysis has been done that shows that as time goes by, even
delaying a collection effort for a few weeks devalues the total A/R by up to
50 percent!  If you are unable to convert your accounts receivable into cash you may be giving your business away! 

A sale is not complete until the money is collected. You want to develop a relationship where continued business is done on a regular basis. Nothing can sour a business relationship like unpaid bills.

Your customers understand that, when a purchase is made or a
service rendered, an invoice is created and a bill is due within the prescribed
billing terms.  If they do not pay, as
agreed, and you accept this inaction without instituting efforts to collect you
may be setting a dangerous president that allows your customer to use you
without consequence of the cost involved. This is unacceptable and a recipe for business failure.

One solution is the outsourcing of collection functions, either
in whole or in part, to independent contractors or consultants. A good outsourcing partner will use their substantial knowledge and expertise to perform the function at a level that could not be performed internally without a substantial investment in trained management personnel. 

When the right consultant is located he should bring substantial knowledge, energy and expertise to the table. The outsourcing partner should be able to provide critical back office assistance as well as help in developing programs and procedures to aid in the further growth of the function. 

A suitable consultant will offer the following services to aid
you in reaching this goal:

Departmental
Policy Manual; Review of existing credit and collection
department policy manual or creation of a credit operations manual including
credit application, sample credit lines, terms of sale, etc.

• 
  Staff
  Development; Recruit, hire, or train existing staff in credit
  and collection policy.
• 
  On-site
  Consulting Service;  Review
  of existing Credit and Collection functions with written recommendations for
  improvements, development of credit and collection policy, credit holds, credit
  lines, terms of sale, collection letters, reminder e-mails, etc.
• 
  Accounts
  Receivable Risk Review; Hands on, on-site review of aged trial
  balance with in-house collection actions, bad-debt write-offs, external
  placements, recommendations for legal actions, etc.
• 
  Contingency
  Collection Actions; External collection actions on specifically
  assigned customer accounts on a contingency fee basis; no collection no fee. 

The future of your business is in your hands. Successfully
integrating a skilled consultant into your collection function may be the key.

Patrick Ingegno can be reached at inner-circle@optimum.net or
www.innercircledebtsolutions.com