Credit Management Group

Building Stronger Business Relationships Even When Your Client Doesn’t Pay

One of the pillars of a successful business is a good relationship with partners. Every business customer should be seen as a life-long partner who will not only continue to do business with your company, but also invite others to do business with you.

Disputes are bound to occur in every business deal that involves accounts receivable. The interests of multiple parties need to be considered when creating an accounts receivable collection strategy. These strategies sometimes create conflicts that damage the business relationship between the two or more parties.

In such a situation, it's essential to handle the issue with tact and resolve disputes with a focus on maintaining a good business relationship.

Importance of Maintaining a Strong Business Relationship

Every business should take the time to build a strong relationship with customers. It's important to treat customers with courtesy and respect even if they don't pay the due amount on time. You need to address and resolve disputes before they make a dent on the relationship.

Making an effort to build a strong business relationship can benefit your company in many ways. Here are just some of the benefits of focusing on building a business relationship with your customers.

1. Differentiation Point - In the present business environment with ever increasing competition, the relationship with customers can help in creating a competitive advantage. Companies that can build a strong bond with customers can thrive in the present business environment.

2. Build a Loyal Customer Base - Companies that focus on maintaining a good relationship with customers can maintain a loyal following. The relationship works in full circles that not only keep the existing customers happy but also bring in additional customers.

3. Enhanced Customer Satisfaction - Another benefit of maintaining a strong business relationship is that it can lead to enhanced customer satisfaction. Satisfied customers will continue to make purchases that will result in the generation of more revenue.

On the other hand, disgruntled customers are more likely to share negative comments about a company. This will hurt the reputation of a company resulting in an adverse effect on the company's profitability.

4. Improved Trust - The long-term success of a company depends on its reputation and trustworthiness. When customers deem a business trustworthy, they are more likely to become loyal customers of the company. This results in more business for the company from the existing customer base.

5. Maximized Lifetime Customer Value - Successful firms understand the value of keeping the customers satisfied. They make every effort to ensure that there is no dent in the business relationship. They know the lifetime customer value and make every effort to maintain a positive relationship with customers at all costs.

A company must endeavor to maintain a strong relationship with customers at all times. At Credit Management Group, we understand that consistent, courteous, and respectful communication goes a long way in maintaining business relationships with customers.

Our experts gently encourage customers to pay back the amount due. We diligently manage the accounts receivables through a unique and systematic collection process. To know more about our accounts receivable collection strategies, you can dial us today at 215-845-5040.

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How Much Is A/R Administration Costing You?

The true cost of accounts receivable (AR) is rarely known or just ignored. But the fact is the AR costs can turn out to be surprisingly large.

A 2017 survey carried out by the Hackett Group found that effective accounts receivable collection strategies can have a positive impact on the gross margin. Companies which can reduce the cash conversion cycle experience 1.2 percent improvement in gross margin. A decrease in DSO by a week can result in nearly 12 percent growth in profitability.

Here are five hidden AR costs that have a direct bearing on the profitability of the company.

1. Cost of Bad Debts - Bad debts can happen when you issue goods on credit. A certain percentage of customers generally don't pay when there is bad debt. The longer the invoice remains unpaid, the more likely it will become a bad debt. Invoices that are not paid for more than a year often turn into bad debts. These bad debts represent a loss to the company. The amount of uncollectable debt is written off by deducting from the gross profit amount.

2. Labor Costs - The accounts and sales team will both be investing time and effort to manage credit customers. They will send invoices, issue reminders, monitor credit limits, reconcile payments, and report on aging debtors. All of these represent hours and, in some cases, days of a difficult task.As the receivables remain unpaid, the cost of accounts receivable collection increases. The cost of telephone calls, follow-up emails, and recordkeeping will increase as the receivables age and hit the bottom line of the company.

3. Cost of Financing - When customers don't pay on time, a business will experience a cash shortfall. To meet the shortfall, overdraft and loan facility will have to be availed. This will result in an increased financing cost and decreased profitability for the company.

4. Time Value of Money - One cost that is often ignored when considering accounts receivable is the time value of money. The concept involves the fact that the money paid today will have more value as compared to the money paid tomorrow. With account receivable, you will receive money later. The delayed payments represent lost opportunity for earning additional income. The longer the money remains unpaid, the greater will be the opportunity cost of accounts receivable.

5. Bad Debt Costs - Bad debts are inevitable with accounts receivable. Invoices that remain unpaid for more than 12 months are likely to cause bad debts. The unpaid invoice amount eats away at the profitability of the company. The reduced profitability along with a cash shortfall due to outstanding debts worsens the liquidity position of the company.

A company should take every possible measure to prevent the aging of accounts receivable. Consider offering an incentive to customers to pay back the amount due earlier. Also, collecting some money in advance can reduce the damage due to unpaid invoices.

Credit Management Group can help you recover the accounts receivable through an integrated four-stage management/collection process. If you want to know more about our process, you can contact us by dialing 215-845-5040.

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Cashflow Management 101 for Businesses

Cashflow management is essential for the survival of any business. Whether you an owner of a small business or the financially responsible party for a larger company you need to efficiently manage your cash through effective cashflow management.

But what does cashflow management actually means? And why it's important for business to efficiently manage their cashflow? How can you monitor the cashflow? Answers to these questions are explained in this article.

What is Cashflow Management?

Cashflow management is the process of monitoring and https://www.thebalancesmb.com/cash-flow-management-2947138 of the company. It involves estimating the cash inflow and outflow during a period, and evaluating whether a surplus or shortfall in cash will occur.

If the cash inflow is estimated to be more than the outflow at any period, a company will likely experience a cash surplus. On the other hand, if the cash inflow is estimated to be less than cash outflow, a company will probably experience a cash shortfall.

Why Cashflow Management is Important?

Effective cashflow management provides value to businesses in many ways. Here are four critical reasons why effective management of cashflow is important regardless of company size.

1. Maintain Solvency

Cashflow management is important for all companies, particularly small businesses, to maintain solvency. Lack of cash is the main reason most startups fail. Having adequate cash in the bank account is important to meet operational expenses and ensure continuing of the business.

Without cash, your business can't operate for long. That's why it's essential to manage your company's cashflow effectively.

2. Critical for Service Businesses

Cashflow management is important for service oriented businesses as well as companies selling products. In order to stay competitive, the companies need to provide services at competitive prices.

Cashflow management is critical. All firms need to be especially diligent in managing accounts receivable to improve cash flow position.

3. Important for Seasonal Businesses

Effective cashflow management is also important for seasonal businesses like travel agencies, lawn care companies, outdoor adventure firms, and holiday retailers. While managing cash flow for seasonable businesses can be challenging, it can be done with the right technique.

4. Reduce Operational Costs and Improve Profitability

Lastly, effective management of cashflow can help boost profitability. It allows you to improve operational costs by relying less on costly internal finances. You can also outsource non-core activities thereby making the internal operations more cost efficient. The result will be a positive effect on the company's bottom line.

How Can You Monitor Your Company's Cashflow?

Cashflow position can easily be analyzed if you use an accounting software such as Xero or QuickBooks. The software can generate a cashflow report showing cash inflow and outflow during a particular period. The software can also run a cash flow forecast report by analyzing your receivables, payables, and bank accounts.

To sum up, cash is the most precious resource for any company. You need to diligently manage the cash in order to cut costs and improve profitability.

http://www.creditmgtgroup.com/ can help companies improve their cashflow position through accelerating payment through proper accounts receivable management at a cost that cannot be duplicated internally. We employ a proven, diplomatic four-phase process to encourage customers to resolve their outstanding obligations with our clients without ever jeopardizing client retention.

To find out more information on how we can help to accelerate customer payments through efficient management of accounts receivable, contact us by dialing 215-845-5040 today.

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