Debt Collection Procedures
For Accountants

Accountants and CPA's serve a very essential and necessary purpose to the success of companies of all sizes. Some of their duties include establishing and maintaining accurate financial records for an individual or a organization, designing and controlling systems of records, auditing books, and preparing financial statements.

They sometimes prepare tax returns and give tax advice. Even as accountants serve their business clients in these capacities, they sometimes suffer cash flow limitations, due to slow paying and delinquent customer accounts.

Because positive cash flow is important to any organization's success, as well as operating at peak efficiency, CPA's should make sure they have solid and consistent debt collection procedures for dealing with delinquent accounts.

Internal Debt Collection Procedures

If there are problems preventing timely payment, more often than not, this can be rectified by communicating with your client. If an account goes more than 30 days past due, it is very important to follow up immediately with a phone call to the client. Ask if there is a problem hindering payment, and offer solutions.

After two complete billing cycles has passed without payment arrangements and/or communications with your client, its time to consider alternative debt collection procedures. Because you understand the importance of the value of lost money, you should consider turning over those non-performing accounts to a debt collection agency. No account should go past due more than 90 days, as recovery becomes more difficult. And third party debt collections is a cost effective manner of recovering on past due receivables.

That being so, accountants can quickly improve their poor cash flow by hiring a third party collection agency.Below are three important points to consider why accountants should turn over their unpaid accounts to a debt collection agency:

The Depreciation Of Money Over Time

As a CPA, you're very aware that past due, uncollected money from services already rendered decrease in value as more time passes. To go after these delinquent accounts not only means additional, valuable time, staffing requirements and other resources, this also takes time away from attracting new clientele.

And it costs exponentially more in marketing and advertising dollars to acquire new clients, than it does to collect from your non-performing receivables.

Turning over delinquent, non-paying accounts to debt collection agencies is a wise and economical business decision. Generating revenue is your core competency. Activities that take you away from those core functions, also take away the focus from generating revenue.

Increase Your Profit Margin Without Acquiring New Customers

As mentioned earlier, you recognize how expensive it is to acquire new customers. While advertising and marketing expenses are necessary for any business wanting to attract new clientele, more often than not, getting new business can seem like the only way to cover and/or grow already narrow profit margins.

Businesses should not overlook the tremendous value lying dormant in their uncollected debt. Be aware also that compared to the value of your outstanding receivables, you would have to nearly double your new business volume merely to break even.

Outsourcing to a debt collection agency is much less expensive, and produces more predictable positive results. The money recouped here can yield greater net profit to your accounting business. Money spent on advertising, while neglecting your past due debt, is not spending money smartly.

Adding Value For Your Business Client

Businesses are always seeking ways to cut costs and save money.. As their accountant, you have the ability to educate your clients and show them additional ways to save, increase cash flow, thereby improving their financial bottom line.

Teaching them the importance of turning over delinquent accounts quickly when internal debt collection procedures prove unsuccessful, you make them see the cost savings in lost opportunity dollars, the depreciation of unpaid debt over time, not to mention the savings from reduced internal staffing and resources.

This is particularly so if you are also experiencing improvements in your own firm's 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.