Despite advances in workflow automation and payment technology, collecting commercial receivables is not getting any easier. Despite improvements in order-to-cash (O2C) processing, the explosion in digital payment mechanisms creates new complications. In addition, the regulatory environment is growing, as is the number of invoices being disputed by customers.
Then there is the issue of economic uncertainty. There’s scant hope that interest rates will return to pre-Covid, easy-money levels anytime soon. Market volatility and rising costs are instead disrupting working capital budgets, causing late payments that inflate accounts receivable (AR). From economic swings to shifting customer habits, business owners must deal with a host of factors impacting their ability to get paid what they’re owed.
Ensuring Successful Debt Collections
Even with these headwinds, there are steps trade creditors can take to improve their collections game:
Be Proactive: It starts with a comprehensive credit application and vetting process and is complemented with clear communications about terms, the billing process, and the expectation of on-time payments. Follow up promptly when a customer’s first invoice goes past due and continue escalating the pressure until paid.
Employ Technology: Automated billing systems, debt collection software, auto-cash, and other tech tools effectively streamline your cash conversion process. These technologies can monitor delinquent accounts, generate automated reminders, and facilitate customer communications.
Offer Flexible Payment Options: Not only will enabling customers to utilize their preferred method of payment (e.g., check, ACH, credit card, etc.), but also offering flexible payment plans, installment options, or early payment discounts will incentivize customers to settle up.
Know the Law: Familiarize yourself with the legal complexities of commercial credit and debt collection. Make sure you and your team understand the basics of the Uniform Commercial Code, Bankruptcy Statutes, and other regulations to avoid compliance pitfalls and missed opportunities to secure payments.
Get Help from the Pros When Appropriate: When debts drag on despite your best efforts, don’t hesitate to enlist professional debt collectors or a creditor’s rights attorney. Their expertise and resources can accelerate difficult recoveries, protect your interests, and allow you to focus on the things you can more easily impact.
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