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Faster, higher, further – companies have to constantly invest in order to hold their ground against competition. Unpaid receivables can quickly become a problem. Earnings and liquidity suffer. And the costs of accounts receivable management rise. But bad debts shouldn't stop you from growing. If the capital for the next innovation step is scarce, I recommend selling non-performing receivables as a good alternative.
Whether it's an invoice for clothes, TV or electricity – consumers who don't pay exist in every industry and pose a challenge for companies. But income, family status or age are no reliable indicators of ability to pay.
Selling the non-performing receivables may be a suitable option to keep losses low. By factoring receivables, you increase your liquidity and reduce your internal workload. How? The following three factors are key to increase liquidity:
1. Determine the right time
Costs and benefits of accounts receivables management need to be balanced. If they are not, it is good to decide at what point it is no longer worthwhile to assign internal employees to it. You can resort to alternatives that make more economic sense – like factoring receivables. A one-time sale of receivables is a good option for a receivables portfolio that has grown over the years. But there's a better way: The ongoing sale of receivables. This can take place from the second reminder or after several months of conducting your own collection as a company. Our experts will find you the best fit.
2. Demand transparency and recognize sustainable offers
What is the value of a receivables portfolio? There is no simple answer to that. What do we know about the transactions? Industry, local market, amount and sales channel will affect the likelihood of payment. And how solvent is the customer? This information, as well as the previous collection measures, must be included in the assessment. This requires an open dialogue between the seller and the potential buyer. The buyer also needs extensive experience to identify and assess the relevant factors. This is especially important with an ongoing sale of receivables.
3. Secure reliable collection
One thing is clear: Customer relationships are important for every company. Even if a customer doesn't pay, this is usually temporary. How long this phase lasts often depends on their total debt. Dialogue and collaboration are crucial when finding solutions to settle the debt. It is important to find a collection partner with experience, customer orientation, a respectful approach, and local expertise.
Many companies offer their products or services in more than one country. Local acquisition competence is not only about language and cultural know-how. It’s also about knowledge of the legal collection processes, as these can vary from country to country.
Companies have told me that "handing over" the customer relationship is often a significant obstacle to selling receivables. However, any serious business partner will address possible concerns and needs. And there are many options: collection fees can be scaled, individual receivables can be transferred back, and finally, customers can be won back once the debt is collected. It will always pay off to have a personal discussion.
You've learned about three key points for success. Timing. Transparency. Fair collection.
But there are even more factors that are important when selling bad debts. These include ensuring the protection of data privacy and compliance and offering your customers their preferred payment option.
First, we take a close look at your portfolio. Then we submit an offer. Once we agree on a contract with you, we promptly pay the agreed purchase price. If you opt for the ongoing model, we will transfer the purchase price payments to you on an ongoing basis. This means you are always liquid. As soon as we have your portfolio, we handle the debt collection – and you have room for innovation. Truly fair, for you and your customers.
Interested in increasing your company’s liquidity? Contact us!