Receivables Performance Management: What's the Difference Between Accounts Receivable Management and Debt Collection?
If you do business, you should be familiar with accounts receivable and how vital this is to the cash flow of the business. Managing accounts receivable are so important that entire teams and firms like Receivables Performance Management are created to ensure that customers pay their invoices on time. There's more to accounts receivable management however than simply debt collection.
Accounts Receivable Management vs. Debt Collection
Although accounts receivable management and debt collection sound similar, the former is wider in scope. In fact, debt collection can be considered under accounts receivable management. Firms like Receivables Performance Management who offer accounts receivable management services include other value-adding services as well. For instance, Receivables Performance Management employs analytical operational processes such as an account behavior scoring model that allows them to segment their inventory and apply different work treatments. Other examples of value-adding services include credit analysis and payment monitoring.
On the other hand, debt collection has more to do with collecting past due funds. As such, a firm that provides debt collection may not offer other services, aside from investigating a client's history of paying debt and sending invoice reminders and demand letters. In general, debt collectors specialize or have extensive experience in recovering as much debt as possible from delinquent accounts while following all federal, state, and local collection laws. One law is the Fair Debt Collection Practices Act (FDCPA) which prohibits the use of abusive, deceptive, and unfair debt collection practices. Under FDCPA, abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
Which Should Businesses Get?
When it comes down to it, the decision to enlist accounts receivable management or debt collection services ultimately depend on the needs of the business. There are firms that offer both like Receivables Performance Management, a national leader in accounts receivable management in the industries of banking and retail card, auto finance, telecommunications, media and utilities, healthcare, commercial finance, and small business.
In the end, accounts receivable is considered the lifeblood of business. Failing to collect on invoices or debt comes at a cost. This is why it is the goal of a great accounts receivable management firm to maximize the return on investment in the receivables while minimizing risk, as well as establishing sound credit policies.
Accounts Receivable Management by Receivables Performance Management
As mentioned, Receivables Performance Management utilizes their operational and analytical expertise spanning more than 175 years collectively to meet client objectives. Their account behavior scoring model is sophisticated enough to take data points such as the Debtor's credit class, location, age, balance range, business type, good phone, mail return, previously contacted, and unit yield, to name a few variables, to differentiate their collection efforts. Aside from developing an account behavior scoring model, they also innovate on their collection strategies and techniques from all contact mediums to optimize their performance.
Stay tuned for more about accounts receivable management by Receivables Performance Management.
