Maybe you run your business because you’re really passionate about what you do, or maybe you found something you’re really good at and enjoy supporting yourself with hard won skills and time. No matter why you do what you do, at the end of the day you have to get paid for all that work. Even the most enthusiastic entrepreneurs have to draft an invoice to afford their overhead.
The more clients you have, the more you need to manage that income. Trying to organize different streams of income can be difficult and take up a lot of your productive time. And that’s assuming all of your clients are paying on time and keeping up their end of the commitment.
For businesses of any size, you can save a lot of time, stress, and money by investing in a professional revenue service. Typically that comes in two forms: receivables management and debt collection. But what’s the difference, and when do you need each one?
What is Receivables Management?
Receivables Management is pretty straightforward. It’s the process of managing your receivable accounts, the money you’re owed for the work that you’ve already done. Keeping track of what’s owed, who has paid, and who has unpaid accounts is obviously a pretty significant part of any business. Of course, devoting huge amounts of time to managing these accounts can take away from other projects and limit your growth if it becomes too unwieldy.
That’s where hiring a receivables management company can come in handy. By outsourcing this process to a firm completely dedicated to managing these accounts, you can increase productivity on your end and trust the rest to the expertise of professionals whose whole job it is to make sure you’re being paid on time.
A management company can streamline your receivables process and often times offer strategies and solutions for your business or industry to guarantee a more steady income. By stabilizing the payment process, these companies can really help your business run more efficiently.
It’s worth noting, however, that a receivables management team won’t be able to do much for accounts that have lapsed into delinquency or approach a 90 day limit. For money that’s already late, you’ll need to turn to debt collections.
What is Commercial Debt Collection?
We’ve covered some of the finer points here, explaining what commercial debt collection entails, but generally, a commercial debt collector is a firm you can turn to once an account has gone unpaid. Often times, you’ll work with other businesses, and if another business is late on their payments to the point of a delinquent account, it can be difficult to address on your own.
Turning to professional debt collection agencies is an excellent way to mitigate potential losses because you’re putting the process of collecting those debts in the hands of people that have extensive experience dealing with collections.
While it’s not uncommon to view debt collection as a last resort, it’s important that business owners act quickly when it comes to unpaid accounts. If you’ve already reached out and received no response, or if you’re approaching 90 days past due, employing a professional debt collection firm can significantly improve your chances of actually getting the money you’re owed.
How Do I Know Which One I Need?
The decision here is pretty simple, and it’s based on the timeline.
Is the account just coming due? If you just sent an invoice and you client hasn’t left a reasonable window of payment, you could employ an receivables management firm to help manage that and future accounts to ensure a steady payment schedule as your revenue and client base expands.
Is the account past due? If you’ve already attempted to collect and you’re leaving a window of reasonable turnaround, it might be time to consider a collections agency. Even if your unpaid account hasn’t hit the 90+ day mark, keeping tabs on an account headed towards delinquency can save you headaches and money in the long run.
Both options can make a big difference on your bottom line at the end of the year. Management is more about making sure things run smoothly and that you do your best to avoid going to collections, however, collections is far more effective at getting your money if a client has already gone beyond the reasonable window of payment.
Bottom Line
At the end of the day, you might find one or both to be effective methods of increasing the profitability of your business. There’s a lot that you can do to manage your business more efficiently as well, from staying on top of invoices and timely communication to establishing a series of schedules and systems to facilitate regular payment.
That said, hiring a professional company can alleviate so much of that stress by offering pre-established systems and methods. If you’re facing a complicated list of clients, revenue streams, and potentially delinquent accounts, we may be able to help!
For those times when clients aren’t exactly timely with their payments, or if you’ve rendered services and fear that someone might headed towards a no-payment situation, contact us at here at AMA for professional commercial collections services.