Out-sourcing Problem Receivables Cash Flow Series

In all the Cash Flow Series articles to date we have stressed how YOU should handle your own receivables

. I am a firm believer in managing your own accounts in-house in most circumstances. Training and policies are easy and affordable to establish, but somewhat more difficult to maintain consistency. It does require you give some consideration to the cost efficacy and skill set when using your personnel. And, no matter how consistent and effective you are, from time to time 3-5 accounts in your receivable mix just will not call back, discuss, or pay. At this point, I think its time to get outside to help intensify the contact and negotiation process. But, there are effective choices outside the traditional bad-debt collection agency process.

I only want to use a collection agency for a final action with a former client. The goal is always to get our money and keep the client, which is a process at odds with typical collection agency process. Consequently, what I am recommending here is outsourcing these few, aged problem accounts to a accounts receivable management firm (ARM) who can call more consistently, use their expertise to negotiate for you, and try to get your money while keeping the client. These firms operate transparently as your receivables department and can have major positive cash flow impact, without the problems, complaints, or lawsuits associated, more and more, with collection agencies.

These alternative account receivables companies can charge a flat fee, monthly subscription, or a percentage of monies collected. I prefer the subscription per account model.as you will know your costs and it brings consistent, affordable coverage without having to worry about the receivables company strong-arming people because they are worried about recapturing costs. This type process can cost you about $ 0.17-$0.20 per day, or less than $5-6 a month to work/call on your accounts. Conversely, with contingent fees, you pay nothing if nothing collected, but the ARM company is also likely NOT to spend much money/effort generating payment on your account, or use strong-armed tactics to assure the recoup their costs, and a flat fee will also promote the tendency for you to check/manage the account more consistently and pull it back if you arent happy due to a lack of contact attempts or style of account management. This account coverage process takes time, an inexpensive subscription company can do that well and consistently. Both are variables that can improve your cash flow, keep your clients, and limit your complaints

by: Lee Croucher

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