Cash Management Secrets

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

How to Eliminate Collection Costs

If you've gotten started with a cash collection system in your own business, congratulations. If not, here are some insights to help you get going at no cost to your company.

The properly implemented cash collection system has all the advantages of doing it yourself (low cost, easy to manage, and effective) with the advantages of a true collections firm (specialized service, compliance with the Fair Debt Collections Practices Act, and the ability to report to all three major credit reporting bureaus.)

Further, because you have handled these accounts through the cash collection system, you can focus 100% of your efforts into the pre-60 day late accounts, increasing the collection rate there and getting more of your accounts before they age.

It is obvious a clearly executed internal collection process will increase dollars collected, help you keep more customers, but how do you eliminate the cost of those few accounts that still go past 65 days? Why not pass it along to the customer?

If you live in a state that allows you to charge for collections (like my state does, Virginia), then you can pass the small fee that is charged for this service right on to the customer, significantly raising both pre and post 60 day late collections without any additional cost! That translates into higher profit to your bottom line just by re-defining roles and putting in place an outsourced cash recovery system.

This truly is the new way to handle collections, and this approach is going to become increasingly crucial as the economy continues in uncertainty. Many clients address this fee upfront in the collections disclosure of any credit application or account agreement.

That's it. Now because you are collecting accounts faster, and because the customer is now paying for any back end collections, your entire receivables collection efforts cost you nothing. That's the magic of having a cash collection system in place for your business.

In another article I share why all this is new to so many, and why the collections agencies on your block don't want you to have this kind of system in your business. Until then, write me here with your questions about collections.

© 2008 Cash Management Secrets, All rights reserved.

Bob Blackburn recovers the cash your business has already earned, while helping you improve receivables management company wide. Hear some of his strategies in his Cash Collection Methods interview.

Posted by Bob Blackburn on October 25, 2008 9:49 AM | Permalink

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