Credit is the lifeblood of business in this day and age. Rather than forcing customers to pay in full for their products and services, businesses can invoice them and request payment at a later date. These promised payments are called “accounts receivable.” Selling on credit can boost a company’s sales, since credit payments are convenient for customers, but they can also result in huge losses when customers are unable to make payments on time. Accounts receivable collections is the aspect of business dedicated to reducing the risk of the latter scenario. Accounts receivable collections involves recovering delinquent accounts receivable from debtors, usually customers or other business entities. The first step in A/R collections involves laying out the terms of payment to the customer through their invoice, which should outline the credit terms, including the monthly and total credit amount, the due date for the payment, the discount or other incentive for early or cash payments, and the penalty amount for late payments. It should also mention which payment methods are allowed and provide a contact number for customer service. Customer service quality plays a major role in A/R collections: satisfied customers are more likely to make timely payments. Sometimes, however, customers simply won’t pay on time – or in some cases, at all. Collecting accounts receivable is a serious matter for businesses of all sizes: if businesses let their accounts receivable go uncollected, their cash flow suffers and they run the risk of going bankrupt. Small businesses often lack the resources to handle accounts receivable collections on their own, and even large businesses may face issues with collections given the large volumes they work with. When the task of accounts receivable collections is too much for a company to handle on its own, they often hire a debt collection agency to handle the job for them. Debt collection may have a bad reputation, but there are some collection agencies that take their job of representing their clients seriously and balance an aggressive approach to recovering accounts receivable with maintaining their clients’ good relations with their customers. Debt collection agencies offer skill and expertise in recovering accounts receivable that can help companies of any size stay solvent in the face of bad debt. If you would like to learn more about commercial collections, click here: Commercial Collection Agency. Thanks! John Bear
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