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April 09, 2009

Vendorseek.com Offers Five Benefits for Outsourcing Commercial Collections

By Susan J. Campbell, TMCnet Contributing Editor


Customers who have a habit of paying slowly – or not at all – present an interesting challenge for a company. For those that are slow, their revenue may still be consistent. For those who do not pay - could the company have done more to ensure this debt is satisfied?

No matter the reason for late or non-existent payments, the reality is that they reflect on the balance sheet as aging receivables. While it is possible to manage these receivables in-house, it does take away from the activities of generating additional business and the company may be better served by outsourcing the process to collection agencies.

Vendorseek.com has provided the Five Benefits of Outsourcing to Commercial Collection Agencies to help businesses to understand how such a move can add value to their operations and allow them to focus on driving new revenue. Here is a summary of those five benefits.

Collect Sooner Rather than Not at All

Collecting on aging accounts is one of the easiest things to put off as it tends to be the least favorite task of any accounts receivable staff member. Unfortunately, the longer a debt remains unpaid, the less likely it is to ever be paid, making delays in collecting that much more costly. Collection agencies are paid to collect on debts and are structured to collect sooner than later. Under such a business model, this money is much more likely to be recovered.

Maximize Revenue   

Sales professionals often feel the pain when all monies are not collected from clients in a timely manner as their full commission may depend upon full payment. When salespeople are pressured to try and collect money from clients, they not only risk hurting client relationships, but also take time away from activities that help to generate future revenue.

Keep the Door Open for Additional Business from Existing Customers

When a company is able to separate debt collection from its own service to clients, relationships can still blossom and lead to addition revenues. And, strong relationships may help motivate the customer to satisfy the debt quickly when that first collection notice arrives.

Work with, not against, Prevailing Business Practices

Keep in mind that every company likes to hold onto its cash as long as possible and the client may just be using this method to manage its cash flow. While some may pay sooner than later, those that pay later just may be trying to hold out as long as possible and one notice from the collection agency is all that is needed to release a check.

Save Money by Paying Only for Results

An internal collections professional is often paid a salary, regardless of actual success in collecting on bad debts. Many commercial collection agencies are paid only when they collect, ensuring the company can maximize the value of this relationship.

The benefits of outsourcing collection practices go beyond the five shared here, but even this short list provides significant arguments in favor of outsourcing this aspect of the business. There is really nothing positive about aging receivables and if a company can maximize collections while maintaining customers and driving new revenue, there is no reason not to investigate the possibility of outsourcing.
 

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Stefania Viscusi


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