Are You Managing Your Receivables, or Are Your Receivables Managing You?
Updated: Feb 20, 2019
In this article, we’ll cover:
Risks of poor receivables management
Signs of reactive and proactive receivables management
How to recover unpaid money and respect customers
In order to run a successful business, you must ensure you are getting the expected return on investment. Few business owners think about the difference between profit margin and ROI, and the factors that can affect cash flow.
Effectively managing receivables is one of these factors to consider. In order to maximize ROI, you need to be proactive about seeking payment on overdue accounts. Failing to do so means that your accounts receivable will age over time. When your accounts age, their value gradually reduces because customers are contacted too late. Late contact also leads to a higher likelihood of customer complaints.
Reactive Receivables Management
We often find that business owners let their past-due accounts languish and they fail to follow up until a crisis moment hits. Perhaps that crisis is a lack of cash flow and a diligent executive puts pressure on staff to get paid.
When collecting on accounts is a lower priority than other tasks necessary to run the business, this is a form of "reactive" receivable management. When you manage your receivables reactively, your receivables manage you.
Signs of reactive receivables management:
You’re unaware of the status of individual accounts and lack standard internal collection procedures
Your staff is reluctant to follow up on overdue bills because they do not want to “offend” customers and are unsure of the outcome
You don't want to upset an important customer
You want to handle your own collections because you are reluctant to pay a "collection fee”
Proactive Receivables Management
The most effective business managers choose to stay on top of receivables. This is a form of "proactive" receivable management.
Signs of proactive receivables management:
You have awareness of the status of all individual accounts
You follow standard internal collection procedures
You have the right people following up on accounts
Contact is initiated at the first sign an account may become overdue
You choose to send accounts to collections because you are process driven
You know how much old A/R accounts cost your business in the long run
How We Solve This Problem
Tavelli Co. can help you find balance and proactively manage your receivables. By taking advantage of our expert services, you'll reduce the cost to manage your receivables and upgrade your processes to a proactive model, rather than a reactive one. Most importantly, you won't have to worry that your customers receive anything, but courtesy from our team.
We have the right people on our team who respectfully help your customers resolve their debts and the best systems in place to ensure we follow-up on time. By providing you with feedback and refining your processes, we proactively manage receivables together, so your business can reach the best results. Contact us to learn more about how we can work together to support your receivables management efforts.