It's easy to blame the number of small business failures on the recent economic crisis, but the truth is, many small businesses simply have trouble managing their funds.
Most businesses these days offer their products and services on credit in order to attract more customers, but many small business owners are unprepared for the extra work involved in collecting accounts receivable.
When a business makes a sale on credit, the money that the customer owes them is called accounts receivable - it's an asset, but not a liquid one; something akin to an IOU.
The entire notion of "buying on credit" is predicated on the assumption that the customer will, at an agreed-upon point in the future, actually pay the money they're owed; however, whether due to negligence, lack of funds, or deliberate intent, this is not always the case.
And when customers don't pay what they owe, that's bad news for a business: their cash flow suffers, and in the worst case, they become insolvent and unable to pay their own expenses.
Collecting receivables in a timely fashion is therefore a vital part of running a business.
Unfortunately, it's also a part that small businesses tend to have trouble with.
Even when their owners are savvy enough to recognize its importance, they typically lack the expertise and manpower necessary to handle it properly, with dire consequences: not only do they risk losing revenue, but they also risk their good standing with their customers.
For many small businesses, accounts receivable collection seems to present a no-win situation, but there is a solution - they can hire a commercial collections agency.
Commercial collections agencies are companies that specialize in accounts receivable collection.
Their business is helping business owners get what they're owed while saving them the hassle of handling collections on their own.
Furthermore, collecting receivables is a delicate process: it's easy to drive away customers with an aggressive approach, but commercial collections agencies have the experience and expertise to collect receivables efficiently without harming their clients' relationships with their customers.
Accounts receivable collection is also highly regulated, with laws in place on both the state and federal level: collecting receivables can feel like navigating a minefield, but a licensed commercial collections agency is guaranteed to obey the law and spare you the risk of legal trouble.
Collecting accounts receivable can be a treacherous tightrope walk between financial disaster and alienating customers, but hiring a commercial collections agency can help small businesses keep their balance and maintain their financial viability.
When one business fails, those around it fall like dominoes: through their efforts, these agencies not only help small businesses, but the economy as a whole.