The Risks of Aged Receivables and How They Impact Commercial Enterprises

Published On: April 24th, 2023Categories: 3rd Party Collections, Commercial Collections, Flat Fee Collections
Commercial glass buildings | Bravo Recovery

Here are 5 different ways slow paying customers can bring pain to your operations

Loss of competitive edge: Business owners need to constantly innovate and adapt to changing customer needs and preferences. They need to invest in research and development, marketing, and customer service to stay ahead of their rivals. However, if they have too much money tied up in aging accounts receivables, they may not have enough funds to finance these activities, resulting in lower quality products or services, reduced customer satisfaction, and loss of market share.

Reduced bargaining power: Enterprises often have to negotiate with their suppliers, distributors, lenders, and other stakeholders to secure favorable terms and conditions for their business operations. However, if they have a high level of delinquent accounts receivables, they may not have enough cash or credit available to meet their obligations or take advantage of opportunities. This can weaken their bargaining power and put them at a disadvantage in their business dealings.

Increased vulnerability/reputation damage: Commercial enterprises face various risks and uncertainties in their business environment, such as fluctuations in demand, prices, costs, regulations, competition, technology, etc. They need to have sufficient liquidity and flexibility to cope with these changes and challenges. However, if they have too much money locked up in slow-moving accounts receivables, they may not be able to respond quickly or effectively to unforeseen events or crises that may affect their business performance or survival. Moreover, the longer a customer’s account remains past due, the more likely it is that the business relationship will become strained. This can lead to a loss of trust and, ultimately, the loss of valuable customers.

Lower growth potential/lost opportunity: No matter the size of company you are, there is a constant need to expand the customer base and market reach in order to grow sales and feed profits. However, if the company has too much money stuck in delinquent account receivables, the company may not be able to pursue these opportunities or take risks that may yield high rewards.

Increased 3rd party collection placements: When receivables are unpaid for an extended period, the business owner is forced to hire external 3rd party business debt collector experts.  You hire them because you never want to go to court as the first option, it should be a last option. Utilizing a 3rd party expert to increase the probability of recovery is a must.

In these situations, time is always of the essence, so you have to move fast. Attempt to rectify past due receivables internally so your money stays in-house, but those instances do surface wherein you will need some help.

It is extremely important to partner up with an affordable, extremely cost-effective, Flat-Fee Pre-Collect service provider like Bravo Recovery to help manage your B2B transactions. Bravo has your back; it is your job to watch your front.