Making and selling products or offering topnotch service is the basis of every business — but are you overlooking another important aspect?
Allen Reis, managing partner of Weltman, Weinberg and Reis Co. LPA, says executives and managers may be neglecting debt collection.
“You assume the customer will fulfill his or her obligations,” says Reis.
But that’s not always the case. Reis says three mistakes can cost companies money: not knowing who the customer is, failing to recognize the commercial customer and failing to obtain collateral.
“Some businesses fail to determine whether they are dealing with an individual or corporate entity,” Reis says. “Or they fail to obtain collateral for the obligation.”
Asking the customer for a deposit or for partial or full payment up front are a few ways of obtaining collateral.
Reis says companies may not be as aggressive and persistent in obtaining past due funds as they should be.
“A company is well within its legal rights to pursue debt collection,” says Reis. “But often, companies aren’t persistent enough in contacting the customer or hiring a professional to force payment or legal action.”
Reis advises companies to know what rights they have to pursue past due accounts and to make every effort within the law to collect funds owed.
“Make sure all accounts are addressed, and be consistent,” he says. “And be cognizant of the customer’s situation. That doesn’t mean be overly sympathetic, but being aware of the situation can help prevent your company from experiencing a more disastrous loss like the customer’s bankruptcy.”
Consider hiring an in-house collections professional for controlling receivables management, Reis says, since often current personnel have neither the time or the training to do the job.
“A staff collector could easily pay for him or herself if effective in reducing outstanding debt,” Reis says. “And that means more bottom line profit for the company.” How to reach: Weltman, Weinberg and Reis, (614) 228-7272 or www.weltman.com