Accounting firms and CPA's provide highly valuable services for companies of all sizes. From small organizations, to larger, major corporations, their know-how and skills cannot be underestimated. This is especially true during tax season.
As federal, state and local governments require companies to maintain accurate and timely financial reports and statements, most organizations depend on accountants to organize these reports.
However, as they help enhance their clients' financial bottom line, it's typical for many accounting firms to experience cash flow problems themselves, due to delinquent and unpaid receivables from some of these same business clients. This is especially so during the very busy tax season. As such, by outsourcing to a third party collection agency, an accounting firm can quickly improve their cash flow.
Here are three very critical reasons accountants should outsource their past due receivables to a debt collection agency:
Money Depreciation Over Time
As an accountant, you’re acutely aware that money earned from services provided today diminish in value with time if those monies go uncollected. To go after these delinquent receivables not only means additional, precious time, staffing requirements and other resources, this also takes time away from attracting new clientele.
To generate new business requires spending demonstrably more in advertising and marketing, than it does to collect from your late and non-paying clients.
Outsourcing these delinquent receivables to debt collection agencies is a smart and cost-conscious business decision. Since they are experts in collecting past due accounts, they are better equipped with the resources, equipment and professionals. And they can do it at a much lower cost than can be done in your organization.
Generating income is your main competency. Activities that take you away from those principal functions, also take away the focus from generating revenue.
Improve Your Profit Margin Without Getting New Customers
As mentioned earlier, you recognize how expensive it is to acquire new customers. As marketing and advertising expenditures are necessary for any organization desiring to gain new customers, its also true that many companies tend to view advertising as the only means to acquire new business and grow already narrow profit margins.
Often overlooked is the tremendous value lying dormant in your uncollected past due debt. It should also be mentioned that when taking in account your past due debt, you’d have to almost double your new business volume just to break even.
Turning delinquent receivables over to a debt collection agency is far less expensive, and yields predictable, positive results. Monies recouped here will produce greater net profit to your accounting firm. Capital spent on marketing/advertising, while ignoring your past due receivables, is not spending intelligent capital.
A Great Value-Added Service For Your Business Clients
Businesses are always looking for ways to cut costs and save money. As their accountant, you can offer additional savings and help advance the cash flow to your customers’ business bottom line.
By impressing upon them the need to quickly turn over non-performing delinquent receivables after their internal efforts have proven unsuccessful, you can show them the cost savings in lost opportunity dollars, the depreciation of past due receivables over time, as well as the savings from the additional staffing, resources and time needed to continue to pursue bad debt internally.
You can also show your clients the increase in your own cash flow and operating efficiency.Showing your business clients how to further save money and increase their business bottom line will put you in even better standing with them. It also makes you stand out from others in a very competitive market who similar accounting services.
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