Cash Management Secrets

Proven cash management strategies that improve cash flow, collect past due money, and increases profits in tight credit markets.

Getting Started with a Cash Collection System

If you can't trust every customer to pay on time and salvage yards will hurt customer relationships, what is left? Progressive businesses have moved towards the Cash Collection System model.

Instead of repeated and extended attempts to collect on the accounts internally, waiting until there is very little chance of getting a significant payment, today's accounts receivable (A/R) managers are integrating an external cash recovery company into their internal operations.

This is why it works:

Accounts that are less than 30 days old are very easy to collect, and should remain the focus of internal accounts receivables efforts. 30-60 days late starts to get difficult, but is still within the scope of what your staff can focus on cost effectively.

Once the 60-day mark is reach, however, the account is placed with a trusted outside firm for soft collections.

Instead of a traditional contingency fee collection company, these progressive companies charge a flat rate and operate as an arm of the A/R department. You are able to submit accounts online, and track the progress.

Because these firms act as an extension of YOUR receivables department you can turn them off at will. Additional, all money is sent to you directly, with nothing taken off the top as with salvage yard collections agencies.

Your business is able to afford to submit accounts much earlier in the cycle (60 days instead of 120 days or later), because the account balances aren't getting swallowed up by fees. Your internal costs are also reduced with this type of system.

And, because you are able to submit the account earlier, the recovery rate is much, much higher because they haven’t gotten too old to collect effectively. Unfortunately, with most companies no matter how hard they try, internal stuff just don't follow up on accounts fast enough, often letting them age 120 days or more before giving them any attention.

In another article I'll show you how to pay for such a system, implement in your business, and how it actually improves cash flow. The first step is choosing to do things a little differently, understanding that with the right system you can collect accounts while lowering costs.

© 2008 Cash Management Secrets, All rights reserved.

Bob Blackburn provides business owners insights to collect past due money quickly. For an informative interview on Cash Collection Methods, visit http://go.jwhco.net/3a6d21

Posted by Bob Blackburn on October 15, 2008 7:30 AM | Permalink

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» How to Eliminate Collection Costs from Cash Management Secrets
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