Collecting on past-due invoices can be a time-consuming and frustrating task, which is why many business owners put off collecting their receivables until they are 60 or even 90 days past due. Sometimes old receivables will even be written off as uncollected. But whether you delay your collection efforts or write off a receivable, the hindering of your cash flow is almost entirely in your hands.
Let’s examine just one of the reasons why it is never a good idea to put off collections efforts until invoices are 60 or 90 days past due. Studies have indicated that the likelihood of successfully collecting on your receivables drops drastically the longer the receivables are allowed to go past due. After 30 days the likelihood of collecting goes down to 90 percent. After 90 days the likelihood drops to 74 percent. Put another way, when an account becomes 90 days overdue your business is only likely to receive 73 cents for every dollar owed. After six months, the amount drops to 50 cents for every dollar. After one year, it plummets to a mere 25 cents for every dollar.
The words “cash flow” should now be blaring in your head. You’re in business to make money. Let us clarify: you’re in business to make 100% of the money owed to you from the sale of your products or services. Not 90%, not 74%, not 50%, and certainly not 25%. If you put off collecting on your invoices until they’re 60 or 90 days past due just because it’s such an unenviable chore, then you can only look to yourself when you begin noticing your cash flow slumping.
We recommend you read a recent article on this blog titled “Improving Your Receivables Collections.” It will offer you valuable insight and tips on how to reexamine and refresh your approach, and ultimately revitalize your cash flow.
REFERENCE(S):
http://www.statshelp.org/ap-statistics-review-sheet/
http://www.abigreturn.com/How_to_Collect_Past-Due_Accounts.html
The Jayaram Law routinely and successfully assists its clients in their business-to-business (b2b) collection needs. We take pride in obtaining payment on accounts receivables without fracturing critical business relationships or engaging in time-consuming and costly litigation efforts.
If you need business debt collection services conducted in a professional manner, contact our B2B (business-to-business) debt collection law firm by calling 312.454.2859 or visiting www.jayaramlaw.com.