Many businesses with outstanding receivables are missing growth opportunities. With funds tied up in receivables that may be generating suboptimal returns, you don’t have the capital to invest in needed equipment, launch new products, or grow revenue. Unresolved receivables can also create real cash flow problems.
How do you make your receivable recovery process more efficient? There are no one-size-fits-all solutions to optimizing the collection of your debt, but there are tips that can help.
Understanding your receivables
To maximize your receivable collections, you need to understand what is outstanding and have a clear strategy for collecting them. You need metrics to know details such as number of customers paying late, number of invoices issued, unreconciled accounts, collection rates and percentage of write-offs. Knowing these key metrics allows you to understand where to focus your collection efforts and where to improve processes by tightening operating standards, increasing automation or setting actionable KPIs.
Make sure your teams can measure their performance
Once you understand what your receivables are and where process can be improved, set KPIs for your internal team such as number of past due accounts, collection rates and amounts and accounts sent to outside collectors. If you are using an internal collections team, be explicit about their KPIs and be able to enforce them. Make your expectations clear with tangible outcomes if not met.
Implement champion vs. challenger comparisons
Test your collection methods against each other and not just set your internal team against external collectors. Pair off different methods within your organization and strategize with your employees to implement and compare different approaches. These measurements will ensure that you are using the best of all your available resources to maximize your collections.
Is ROI on budget?
A key measurement when looking at collecting receivables is if the ROI (return on investment) is in line with your budget. When does the expenditure of resources and the cost of tied up capital exceed the recovered collectables? Would it be cheaper to outsource all or a larger part of the process? Could you sell the debt to a receivables management company? Is collecting your receivables, or certain segments of them, hurting your bottom line? Ask these questions and perhaps it is time to refocus your efforts.
Customer care
All this measuring and comparing must include the impact on your customers. Do misaligned systems mean customers are being hounded for accounts that are already paid? Are they being called by both internal and external teams? Is the means of communication their preferred method? Is the payment framework imposed too punitive? Collection methods that hurt customers create churn while at the same time damaging your reputation.
Consider selling versus servicing
Debt collection is a process and an expertise. There may come a moment when you have exhausted your best efforts and are not meeting your objectives. There are other options – it may be time to consider selling your debt. When you sell your debt to a receivables management firm, you sell at a discounted value and the buyer assumes the responsibility and the risk of debt recovery. This solution offers you an immediate upfront payment and offers operational efficiencies as they take on and manage the debt recover efforts.
The Wrap
Managing your receivables is an important part of business, just like other assets. Receivables should be managed properly, and it can sometimes be a difficult task to manage internally.
Outsourcing your debt recovery can offer some smart and timely alternatives. Canaccede Financial Group is the largest multi-asset acquirer in Canada. we provide both debt servicing and purchasing solutions. Our expert valuation team can work with you to size the debt recovery potential for your organization. If you, or someone on your team, would like to find out more, please contact us at partnerships@canaccede.com .
To find out more about CFG and how we can help, click here .
