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Why You Should Consider Accounts Receivable Management

There’s nothing more frustrating than being owed money that you can’t seem to collect. Knowing your money is out there but not knowing when it will hit your bank account could keep you up at night.

Consumer electronics (CE) vendors spend a lot of time and large sums of money designing, testing, manufacturing, importing and selling products. But if they are having problems collecting revenue for this effort, all these activities will be jeopardized. A collections-starved CE company could be unable to pay for its inventory, operating expenses and employee salaries.

Bottom line: not being able to collect what you’re owed can hurt your company’s reputation, if not your business entirely.

Payment delays occur more often than you might think. According to a recent TWICE survey of CE industry executives, 30% of respondents note they get paid when they expect to get paid only 75% of the time, and 7% report that only half of their customers pay on time.

So what can CE manufacturers do? Fortunately, there’s a simple solution for getting paid on your accounts receivable: let someone with more leverage obtain payment.

Accounts Receivable Management

An accounts receivable (AR) management firm performs many of your accounts receivables functions including credit checks, payment receipt and application, bookkeeping and reporting.  They also provide collections services on delinquent accounts.

Why will this help you get paid faster?  Two reasons:

First, these firms have a multitude of clients who do business with many of the same retailers that you do –thousands of retailers and distributors across the country and even internationally. Over the years, AR management companies, such as CIT Commercial Services (CIT), have nurtured deep relationships with these retailers and distributors which helps smooth out any issues and works to keep collections coming in on time.  

Second, an AR management company employs an array of experts, a team of professionals committed to only one goal: obtaining payment as quickly as possible.

Not only will an AR management company collect your money more effectively than you can, but it can also decrease operating costs by reducing the need for internal full time staff, especially desirable for seasonal businesses or companies with unpredictable sales volumes. Typically, a mid-sized manufacturer will have from two to five full-time employees handling credit and collections, according to the TWICE survey of CE executives.

Take Outsourcing Measures and Take Control of Your Company

An AR management company can do more than just collections for you. Depending on your needs, it can bundle other services such as credit protection to guard against bad debt losses, or advancing cash against accounts receivable or inventory to enhance your cash flow and provide you with the working capital needed for a business. Having a trustworthy AR management company and financing institution on your side not only improves operational efficiency and takes care of collection hassles, it can also decrease fixed costs and provide flexibility when it comes to working capital needs.

No matter what services you wish to take advantage of, you maintain control over your company. Companies such as CIT are there to provide you with the credit protection and funding that your company needs to grow and thrive. CIT’s goal is to enable you to sell as much as you can without getting stuck in a bad debt situation, or having your collections delayed for long periods of time – so you can get a solid night’s sleep.

Joel Wolitzer is a business development officer atCIT Commercial Services. With over 18 years’ experience, Joel has structured many financing arrangements for companies in the consumer products space, including consumer electronics, apparel, textiles, and housewares. Joel has a deep understanding of the retail supply chain, as well as the retailers to whom his clients sell.