With 2022 in the review mirror, it’s time to get a jump on improving cash flow while it's still early in the year in order to protect your business against recessionary pressures.
It’s SWOT time
Now is a great time to take stock of your business. While you should review your whole operation, cash flow is the key to your flexibility and may even offer you the capacity to grow in a recessionary environment. It's a good time for a cash-flow SWOT analysis.
Strengths
You have a solid customer base with good potential for growth and your internal accounts receivables team may be doing an excellent job processing the performing accounts.
Weaknesses
The team has limited time and resources to chase the growing number of past-due and insolvent accounts and when they do, they are producing limited results. When collections are not part of their measurable goals, employees lack the motivation to chase these accounts.
Opportunities
Instead of tying up resources going after stale and written-off accounts or working a business line that may be winding down or otherwise deemed unprofitable, sell your unwanted debts to a receivables management company. Your business gets an injection of cash to free up capacity to tackle some of those other New Year’s resolutions. Debt buyers can offer different options to assist your cash flow:
- A one-time bulk sale of accounts
- Establish a relationship in which predetermined types of accounts (charged-off, insolvent, etc.) automatically flow to the debt buyer stabilizing your cash flow. A great way to ensure recurring and predictable monetization of non-performing debt, regardless of the macroeconomic environment, is to establish a forward flow at pre-agreed pricing.
All options provide an influx of resources while freeing up your internal teams to better serve your customers.
Threats
The threat of maintaining the status quo is you will continue to have too much money tied up in overdue accounts, restricting your cash flow and limiting your ability to grow. This is especially true in a recessionary environment, with higher funding costs and greater consumer hardships. The debt that is making your company vulnerable can be sold and become an asset allowing flexibility and increased capacity.
Make a Plan
Now that you have a clear view of your opportunities to optimize your cash flow, establish benchmarks to track performance. Don’t just set KPIs for your internal performance – if you sell your debt, establish performance objectives for your external partners to ensure you have the right solution.
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.
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