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Topics: Accounts Receivable Management

Is your accounts receivable management on your mind? It should be—it’s one of the most important tasks a business can look after. Good management means you get paid sooner and your cash flows improve; poor management can spell trouble. 

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Improving the management of this vital task comes with plenty of benefits for your firm, such as boosting your cash flows and simultaneously reducing your costs.

Bad Management Hurts You

If you don’t believe accounts receivable management is all that important, start by taking a look at an example of poor management. 

A company not managing accounts receivable effectively has trouble on its hands. Customer accounts may be overdue, sometimes for months before collection occurs. As more and more accounts become overdue, the company’s inflowing cash is reduced. 

As a result of this reduced cash flow, the company may need to turn to credit to cover all of its own monthly obligations. This is risky business: The firm’s chances of defaulting become higher and higher as it borrows more to cover costs until accounts are collected. When the accounts are collected, some of the money has to go toward paying down the company’s debt—and often, it can’t be paid off. 

The result is an ever-upward spiral of debt repayment and interest fees, which increase the firm’s operating costs and leave it in a precarious position.

Better Management, Better Firm

On the other hand, good accounts receivable management helps businesses in many ways. 

If poor management leaves companies floundering and struggling to pay their monthly bills, good accounts receivable management boosts cash flow and leaves businesses with a surplus of funds at the end of the month. Those funds can be used to pay down debts, fund new initiatives, or invest in other ventures to create profit and additional value for shareholders. 

It also reduces costs: Businesses don’t need to take out loans to float the company from month to month, racking up debt and paying interest and insurance fees on their loans. When your accounts are collected, the money is yours to use in your quest to grow your business and find ever-better profits.

Getting Better Management

As much as a business experiencing poor accounts receivable management wants to correct course, it sometimes feels impossible. To get better management, you’d need to spend money—by implementing new infrastructure or programs to make the collections process easier or by adding staff members to your existing team. Since you’re already strapped for cash, this additional spend may seem like an impossible ask.

Don’t forget the old saying, though: “You have to spend money to make money.” Are you better off taking out stop-gap loans and paying high interest fees, or investing in a better accounts receivable management process? The former is like a bandage over a wound that needs stitches; if you don’t sew it up, you’re simply going to continue struggling.

Instead of looking for a short-term fix, focus on the long term and invest in your accounts receivable management. In some cases, that might mean looking at outsourcing. Adding the resources in-house may simply be too costly—and it may not fix the problem. Instead, turn to the experts who can help you better manage accounts receivable—and manage the overhead costs associated with it.

Lower Costs through Outsourcing

As mentioned, outsourcing the management of your accounts receivable is sometimes the more economical option, especially when you’re strapped for cash. Your partner provider can help you manage not only accounts receivable, but the costs of collecting on those accounts as well.

Since outsourcing puts you in touch with the experts, they’ll be able to manage the process quickly and effectively, meaning you’ll see accelerated account collection.


Kenny Johnston

Kenny Johnston

Kenny brings over 20 years of industry experience to his role as president of Bill Gosling Outsourcing. He began his career in the United Kingdom in 1993, and has progressed his way through the ranks to his current role. Kenny is responsible for operational budgets, developing client relationships, and working to create the long-term vision, business philosophy, and company culture that Bill Gosling Outsourcing aspires to.

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