The Guide To Preventing Bad Debts in B2B Product, sales/marketing and collections are the three key drivers of business growth - however very few businesses focus on collections. The success and sustained growth of B2B businesses can be enhanced through a focus on enhancing collections through a clear credit approval process, automated AR and enhanced bad debt management.
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here are three key drivers of growth in a business- product, sales, and cash collection; however, the third one rarely receives the attention it deserves. Businesses often focus on sales/marketing and product – while taking cash collection as a given. The success of many B2B companies depends on their ability to manage the receivables collection function efficiently. And this is a function that deserves more attention, investment, and, dare we say, credit than it usually gets. When you sell a product or perform service on credit, you are also in the B2B accounts receivables collection business. The financial health of your company depends on how well your business can collect on sales. Unfortunately, it is often performed with inadequate forethought to the systems, staff, strategy, and tactics to deliver exceptional results. And businesses find that their customers are using them as a bank, with many overdue invoices impacting the cash flow and growth prospects of the company.
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What causes bad debt issues for business? Credit, or rather the lack of creditrisk strategies, can often lead to bad B2B business debts. The problems can intensify with the lack of efficient operating models and insufficient management focus. Lack of credit risk strategies Many businesses do not implement a robust framework for credit-risk assessment. They do not follow the global best practices that reduce customer delinquency and debt collection. Not accounting for credit risk can lead to unhealthy business growth. It expands the customer base but depresses the profitability. Lack of specialized staff for debt collection Most companies do not have a specialized debt collection team, and they mostly rely on external agencies for the same. Some outsource this job to call-center agents who lack proper training to assess a customer’s situation.
@ezycollect
AJ Singh,CEO and Co-founder, ezyCollect AJ is the CEO and Co-founder of ezyCollect. He has a proven track record in start-ups, having successfully founded and sold two businesses in the last 10 years. His business acumen, combined with his passion for technology & innovation, led to the development of the ezyCollect AR automation solution that empowers small and medium enterprises to get paid faster, and enhance their cashflow.
Lack of management focus Top executives seem to be more occupied by transformation, innovation, and digitization that accounts receivables & collection is usually not in the spotlight. Bad debt figures don’t often feature on the agenda, making it harder to improve the situation.
How can one manage bad debts effectively? Debt management is vital to a business as it ensures that the company has enough working capital to reinvest and grow. Effectively managing debt requires some thought and planning and can be controlled with these simple steps. Implement a credit policy Most businesses have an informal arrangement for supplying goods and services. Not having clear, written terms of trade can lead to several disputes creating bad debts. B2B companies require a firm credit policy to ensure their continued growth. Before offering credit to new customers,
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