Slow Receivables Turnover and Bad Debt Loss – Solutions from Accord
Slow receivables turnover is the tip of the iceberg, with bad debt losses sure to follow. Accord’s simple solutions keep your business liquid.
Let Accord solve slow receivables turnover and eliminate the risk of a bad debt loss
Slow accounts receivable turnover is a common cash-flow challenge for businesses of all sizes. And bad debt losses are sure to follow. Whether your business is a start-up, an emerging growth company, or a large, mature organization, slow receivables turnover is a problem rarely solved by traditional bank financing.
The ideal way to improve your receivables turnover and manage bad debt loss is to outsource your accounts receivable management to Accord. And if flexible financing would help bridge the gap between paying suppliers and collecting from customers, we can provide that too.
We have several services perfectly designed to manage your turnover and meet your financing challenges:
- Complete accounts receivable management - improve accounts receivable turnover and minimize bad debts with full credit & collection service including 100% accounts receivable guarantees
- Accounts receivable financing and factoring - financing your invoices eliminates the challenge of slow receivables turnover by providing upfront cash to manage your ongoing expenses while you wait to collect from customers
- Supply chain finance with AccordOctet - provides quick payment to your suppliers and allows up to 120 days for you to repay Accord
The credit and collections problem
If you’ve shipped in good faith and your customer fails to pay, what do you do? Collecting is a problem. It’s a problem this month; it’s going to be a problem every month. The other problem with collecting is that it’s not the real problem. The real problem is credit. If the right credit decision had been made then, you wouldn’t have so much trouble collecting now. And if you made the wrong credit decision, a bad debt loss may be right around the corner.
Slow accounts receivable turnover
One of the top priorities for any business is to get paid for the goods or services you’ve delivered to your customers. Avoiding bad debt starts with accurate invoicing and diligent follow-up. To optimize your accounts receivable turnover, you need an effective system to track who owes you, how much and for how long. Most importantly, you need firm, consistent communication with late payers to make sure their invoices get paid before the next shipment. All this takes time, patience and persistence.
Even when payments arrive, they’re often less than expected. Unauthorized discounts, debit memos and credit notes all need to be vetted and accounted for. Then there are questionable disputes and skipped invoices. And throughout the process all payments must be accurately matched to their relevant invoices. What’s more, the follow-up to any short payment must be fast. The question is simple enough: “Your check is short. Why?” Delays to the answer mean your chances of collecting become more remote by the day. Before you know it, bad debt losses start to add up.
The hidden cost of slow receivables turnover
Carrying a past-due customer, or writing off a bad debt, means you have to borrow from the bank. This means the money you’re owed is working for 1) your delinquent customer and 2) your bank. One thing for sure, it isn’t working for you.
Which brings us back to collections. Collections are a heavy user of time, effort and money. They also require a certain attitude on the part of the collector, a certain firm but persistent skill. Good collectors are not born, they are carefully trained. Good collectors are rare and therefore costly.
A bad debt loss will happen, the only question is when?
It’s very difficult to predict which customer will default on their payment to you, but eventually one of them will. Even if you have strong financing for your business you can’t be sure all your customers are equally strong. A bad debt loss, especially from a large customer, can put your entire business at risk.
Turn to Accord for faster receivables turnover
Accord’s three simple solutions can eliminate the risk of a bad debt loss and relieve the pressure of slow receivables turnover:
- Complete accounts receivable management
- Accounts receivable financing
- Supply chain finance with AccordOctet
Nearly 40 years of experience in your industry pays off
We’ve successfully helped companies improve slow receivables turnover and avoid bad debts in a variety of sectors, including:
- Apparel & textile
- Wholesale & distribution
- Import and export
- Food & beverage
- And many more
With deep experience in your industry, and a broad range of creative solutions, make Accord your first choice for your cash flow challenges.
SLOW RECEIVABLES TURNOVER AND BAD DEBT LOSS FAQ
SLOW RECEIVABLES TURNOVER FAQ
Slow receivables turnover is when your accounts receivable are extending beyond the standard or agreed upon terms.
If your company is experiencing slow receivables turnover, you should consider utilizing Accord’s experts who can provide accounts receivable management to streamline your entire A/R process, or improve your firm’s liquidity with accounts receivable financing.
Your accounts receivable turnover ratio is calculated by using the following formula:
The ratio is calculated by your net credit sales for a given period divided by average accounts receivable for that same period. This will tell you whether your accounts receivable are being paid within the agreed term or you are experiencing slow receivables turnover.
A high accounts receivable turnover ratio indicates that your customers are paying in a timely manner and as a result you are limiting the amount of capital tied up in your accounts receivable.
A low ratio, on the other hand, indicates that you are experiencing slow receivables turnover and that you should take measures to avoid this turning into bad debt.
Inventory turnover is the rate at which your company is selling and replacing inventory. Accounts receivable turnover is the rate at which your company is collecting on sales where you have extended credit to your customers.
Accord has decades of experience improving slow receivables turnover and providing accounts receivable financing to ensure your success. Call us now to see how you can improve your slow receivables turnover: +1-844-932-9940 (Canada) / +1-844-725-4225 (US).
BAD DEBT LOSS FAQ
A bad debt loss occurs when you are unable to collect an outstanding invoice or account receivable from your customer.
To calculate bad debt loss percentage or ratio, divide the amount of your bad debts by the total sales for a specific period of time, and then multiply by 100.
Bad debt loss is uncollected debt owed to your company.
Capital loss refers to an investment your company made that depreciated in value.
No, your allowance for bad debts is applied as a contra account against your accounts receivable, therefore reducing the total assets on your balance sheet.
The best solution to minimize bad debt loss is to utilize an experienced accounts receivable management team to gain control of your collection cycle.
Give us a call to discuss how you can minimize your bad debt losses: +1-844-932-9940 (Canada) / +1-844-725-4225 (US).
The best bad debt collection agencies have the following main characteristics:
- an official license to operate
- a history of successfully collecting on defaulted debts
- experience in your industry
- a volume of debt being collected of a similar scale as that which you need collected
- a dedicated trust account to gather payments from your debtors separately from those of other customers of the collecting agency
- evidence of the collection process’ conformance to state/province regulations—you may be liable for your agency’s behavior if no prior due diligence has been done
Often a collection agency will be able to help you recover a portion of your bad debts.
However, you can also implement strategies to prevent bad debts before they occur. This would include credit guarantees or accounts receivables management services from a company such as Accord, that has over 40 years of experience steering companies away from bad debt losses.
Give us a call to learn how we can help you succeed: +1-844-932-9940 (Canada) / +1-844-725-4225 (US).
Yes. Some of the services we offer that can mitigate bad debt loss are: