Every business would like to see their account receivables paid in full and on time. This gives businesses of all sizes the liquidity to pay employees, cover daily expenses and grow their business.
The perils of “do-it-yourself" debt management
Money that is paid within your receivables collection period provides predictable and stable income to run the business. There are impacts to your business when those receivables do not get paid on time
- Time and Resources: Tasking your employees with collection efforts take time and resources away from core operations. This kind of collecting – which is rarely part their measurable objectives – is seen by your teams as a drain with no overriding incentive to collect this debt and therefore minimal results.
- Outsourcing Collections: To keep your teams focused on moving forward, you could outsource the task directly to collection agencies. Outsourcing does not necessarily maximize the value of your receivables. The capacity of a 3rd party to invest more in collections is limited by their incremental contingency fees.
Optimizing your receivables
Mismanagement of your receivables means you are missing out on revenue, delaying investments, and reducing profit projections.
As these outstanding receivables trickle in, businesses write them off as losses. However, even after charging off bad debt there still is an option to recover on that amount. How could charged off debt help your business? For many organizations, debt sale turns losses into a win.
Is selling your debt right for you?
The first thing to do is evaluate your situation to help determine the next course of action. Ask yourself the following questions:
- Do you have a need for immediate cash?
- Do you have distressed/charged off accounts or insolvencies that you could sell?
- Is collecting defaulted debt core to your business?
- Do you have operational capacity constraints, and could utilize those resources elsewhere?
- Have you tried and/or are unable to collect payment on outstanding debt?
- Is there limited or no opportunity to recover the funds?
You may conclude that you can afford the time and/or money to recover your debt yourself. However, if these questions lead you to realize that debt recovery is putting undue strains on your business and causing you to miss out on opportunities for growth, then it may be time to explore debt sale.
What is selling your debt?
By selling your debt to a receivables management company, you can get an immediate injection of cash and free up your employees to concentrate on reducing losses and other more profitable ventures. A receivables management company will give you a fixed price for the delinquent receivables, which allows you to more accurately project recoveries and establish budgets.
How does debt buying work?
- The debt buying firm takes ownership of the delinquent accounts.
- They then pursue a variety of strategies to reclaim some value including structuring a new set of terms for repayment with the debtor.
- They leverage the value of the outstanding, delinquent debt to generate a return on their investment. And, as a final note, a quality debt buying partner will work hard to protect your brand by providing your customers with a positive customer experience.
The Wrap
Managing your receivables is an important part of business, just like other assets. Receivables should be managed properly, and it can sometimes be a difficult task to manage internally.
Outsourcing your debt recovery can offer some smart and timely alternatives. Canaccede Financial Group is the largest multi-asset acquirer in Canada. we provide both debt servicing and purchasing solutions. 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 us at partnerships@canaccede.com .
