Single Most Overlooked Factor Driving your Receivables Recovery: TIME
By Mark Zellmann, President, Jefferson Capital Systems, LLC
When considering the recovery of your receivables, the biggest and most frequently overlooked factor is time. The time spent by your team collecting past-due accounts or the time waiting for customers to make payments is critically important. Those delays and expenses result in lost opportunity costs. Precious corporate resources that could have been better used elsewhere by your company to grow your business. Let’s break down why timing is so critically important for recoveries.
The cost of collecting
All businesses know that the management of past-due receivables is an unfortunate cost of doing business. Implementing a receivable recovery plan involves personnel, management and overhead. These resources and investments tied up in the collections process is money that could be deployed elsewhere.
The timeline of recovery is uncertain
The longer the recovery process takes, the more money it costs your company. Unfortunately, however, that timeline is filled with uncertainty. There are of course the habitual late payers you can count on to pay with a reminder. After that, however, it becomes much harder to predict when people will pay. If your customer is delinquent on paying off their account a customized payment plan may result in recovery of a percentage of your receivables. While that is better than writing off the total amount of the account, it could take up to five years before you fully realize the intended recovery goal. That means five years of ongoing management of and investment in recovery expenses. It also requires the risk and uncertainty of trying to predict future fluctuations in recovery and the impact on your company’s cash flow.
Time is money
We all know that faster is of course better. During the time you are waiting to recover payments from your receivables, you are not only spending resources on recovery, but you are also missing the opportunity to invest that money now. Using capital to start generating returns immediately will earn more over time than investing the same money five years from now.
Selling your debt
Bottom line: The time spent collecting or waiting for receivables, coupled with the increased costs of collections, result in missed opportunities to grow your business.
The better approach is to evaluate whether it makes more sense to sell your debt or outsource the servicing of it. In exchange for your non-paying accounts, a reputable and experienced receivables management company can provide immediate cash up-front. It will also accept all the risk related to whether those accounts will ultimately ever make a payment. Meanwhile, you can invest those funds and resources back into your business.
Managing your receivables is an important part of business. Just like your other business assets, however, receivables must be properly managed. It can sometimes be difficult to effectively and efficiently manage them internally.
Outsourcing some or all of your debt recovery operations can offer some smart and timely alternatives. Jefferson Capital offers both debt servicing and purchasing solutions for charged-off and bankruptcy receivables. It offers almost twenty years of experience in the industry and has established partnerships with hundreds of creditors large and small.
Whether your accounts are secured or unsecured, our expert valuation team can work with you to size the debt recovery potential for your organization. If you, or someone on your team, would like to find out more, please contact Penny Campbell at Penny.Campbell@jcap.com or Bob Maisel at Bob.Maisel@jcap.com. We’d love to offer you solutions that give you back the most important factor in the receivables business – time.