How does credit management work?

Debt collection

Credit recovery: how should this be done? This is a question posed by several companies, increasingly struggling with insolvent customers in this difficult historical period. Such a situation generates financial and economic difficulties for companies, which naturally find themselves short of cash. It also creates a certain embarrassment within the company itself, as it must recover what is due from customers, many of whom may be long term.

The best solution in these cases is to rely on outsourced debt collection, also called credit management. This is one of the services provided by We Are Fiber, who is always alongside its customers to handle even the thorniest issues with professionalism.

The partners who have relied on us have significantly reduced waiting times to recover credit, increasing annual profit by 15%. Our staff is able to find satisfactory solutions for the insolvent subject, helping such persons to pay the amount due in a reasonable time and manner and guaranteeing your business the recovery of the credit due.

Credit management and control: how does it affect the life of a company?

Outsourced debt collection

Before understanding how to conduct credit collection, it is important to appreciate how credit management can impact a company. Specifically, it is necessary to evaluate the following aspects:

  • commercial: the image of a company within the market is also measured on the basis of the level of satisfaction of its customers in relation to administrative management. An overly aggressive approach alienates the customer, while an overly soft approach results in a negative and unprofessional image for the same company.
  • economic: failure to collect credit has repercussions of an economic nature, where economic benefits are lost, resulting in fiscal and other consequences.
  • financial: failure to recover credit causes liquidity problems, with the risk of not being able to pay employees and for equipment purchased or simply not being able to bear normal expenses.
  • accounting: trade receivables must be recorded in the balance sheet, which can be negatively impacted if you do not know when they can be collected.

Debt collection: how to do it and how it works

When we talk about credit management, we do not refer exclusively to credit recovery, but rather to a 360° analysis of commercial strategies and sales policies. The credit recovery outsourcing process takes into consideration various aspects, from sales to invoicing to collections, so as to indicate the most appropriate strategies depending on the case.

The methodology of collaboration with the external company can take two forms: open-ended and fixed-term. In the first case, the entire credit management process is entrusted to an external party, without time limits. In the second case, the help of an external partner may be required to resolve particular cases, such as disputed or expired credit, or for other circumstances such as the recovery of credit from thorny customers or for extraordinary transactions.

What are the advantages of outsourced debt collection?

After delving into how to conduct debt collection, let’s focus on the tangible benefits.

The external partner anticipates and minimizes the risks of insolvency. The company often realizes that particular credit is bad when it is too late and perhaps the documentation relating to the sale is even no longer recoverable. By playing in advance, it is possible to stop such instances that lead to insolvency situations on the part of customers.

The departments of the company that operate in the economic, financial and accounting fields have a single point of reference to turn to and can work in perfect synergy. Everyone is rowing in the same direction, achieving their goals with greater ease. Activities are leaner and faster, to the benefit of business productivity. The same internal resources acquire new skills and abilities, which can be spent in the immediate future for the good of the company.

Each company can customize the outsourced service as required, even from an economic point of view. Costs may, in fact, depend on volumes or performance. In addition, an outsourced credit recovery service may be requested based on seasonality or other needs.

Finally, the relationship with the customer is not affected, who interacts with the company in charge of the credit service and not directly with the company.

Why outsource? 

Outsourcing is a process that is increasingly popular for companies, not only in the field of credit management. In a recent article, for example, we explained why outsourcing customer service is worthwhile.

The costs are definitely sustainable and the investment made is recovered over time in the form of economic and time savings. The company can concentrate on its core business, freeing internal resources from cumbersome and repetitive tasks.

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