The Pros And Cons Of Extending Credit Terms

Credit terms can significantly affect the cash flow of businesses. Hence, it is a must for both big and small businesses to have established credit terms. One of the most common dilemmas concerning credit terms is whether they should be extended. Here are some benefits and drawbacks of extending credit to clients: 

Pros:

More loyal clients- A business that extends credit gives clients the impression that the company trusts them. Also, clients will most likely appreciate the convenience that extended credit offers because it helps them to be flexible with their finances. 

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Competitive advantage- Other businesses in the market may not be offering extended credit to clients, so companies that do otherwise gain an edge over those competitors.

Increase in sales- Studies show that most customers tend to be more willing to pay more with the knowledge that they can pay later. This results in businesses gaining more clients and gaining sales, assuming that they pay.

Cons:

Unreliable clients- Extending credit may gain loyal clients, but it can gain unreliable ones as well. Businesses will often come across clients who pay extremely late or those who do not pay at all. 

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Cash flow problems- Strict credit policy results to steady cash flow while extended credit terms may disrupt the resilience of cash flow because of unreliable clients.

Insufficient income- Cash flow problems, if not handled efficiently, will most likely result in insufficient revenue. This may force the business to borrow money to sustain operations. 

Brennan and Clark has been providing businesses with quality debt recovery services since 1980. For updates about credit collection, follow this Twitter account.

Business collection agencies: Choosing the right one

On occasion, hiring a business collection agency is a necessity. This is mainly because business owners have a bulk of responsibilities, and handling delinquent accounts can be physically, emotionally, and mentally draining. However, while many business collection agencies deliver, they are not managed and ran equally. That is why it is important to be meticulous in choosing from which agency to seek assistance. Below are some points to consider when choosing the best business collection agency:

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1. Research

Business collection agencies usually have specific fields of expertise. For instance, some agencies deliver remarkable results from large businesses, while others excel in small business or home-based enterprises. Knowing the type of agency and their most common business dealings can be utilized to the business owner’s advantage.

2. Asking about “skip tracing”

Owners of delinquent accounts could skip town, making it much harder for businesses to collect their dues. In order to prevent this, good collection agencies use what is known as “skip tracing.” By accessing several databases, they can track down debtors who have not left any forwarding address.

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3. Agency insurance

Despite all the research findings, there will be times the collection agency will act aggressively, making the debtor feel that the collector acted in bad faith. In this instance, the debtor can sue. Acquiring proof of insurance will ensure the business owner will not be held liable for hiring the agency.

Brennan & Clark is a business collection agency that has been operating since 1980. A member of the Commercial Collection Agency of the Commercial Law League, the firm offers unparalleled service and the most comprehensive guarantee in the industry. Know more about the company here.

Small Business Money Matters: Understanding and Optimizing Cash Flow

Cash flow plays a vital role in the survival of any business through all the stages of its life cycle. Nowhere is this more important during the buildup phase, where business owners must pay off debt obligations, pay employees, and stretch out the initial funds until the enterprise can get on its feet. Companies that fail to manage cash flow adequately within the first year of operations almost certainly fail to survive the following year.

As the business expands, the revenue accumulated would pay not only for the operational expenses but also serve as a gauge to determine potentials for growth. Frequent interruptions in cash flow can stymie development and may in extreme cases cause a business to grind to a halt.

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Cash flow management begins with finding the break-even floor, the point where revenues match expenses. Efforts must be made to break even, which may seem initially counterintuitive for those oriented toward profit, but would actually free business owners to pursue profit once all expenses have been covered. Payment capacity, in turn, should be based on actual revenues on hand rather than short-term profit projections.

Ensuring cash flow may also entail actively reducing and managing expenses. While some expenses can be eliminated from the onset (something lean startup advocates prioritize), others must be selected over others. Paying for everything all at once is a recipe for long-term disaster; whenever possible, businesses should get longer payment terms on loans and credit to reduce their initial monthly cost.

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Finally, business owners should make efforts to boost the amount of payments coming in. For sales-based businesses, this involves creative incentives to motivate employees to close more deals. Commission-based business-to-business enterprises should have in place a system to deal with the occasional late payments. Finally, businesses that offer in-store credit should have stricter requirements for any credit applicants.

Having behind it more than 30 years of experience in the revenue collections industry, Brennan and Clark works closely with clients to create programs that enhance their existing collections strategies. Visit this Facebook page for more on the company and its services.

Navigating Through the Process of Payment Collections

Payment collection is the awkward elephant in the living room that every business must eventually master.  Payments made on time are the lifeblood of the company, guaranteeing a steady stream of cash flow to cover operational expenses and invest in growth without squandering credit lines.

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Because making payments on time are an important matter, it is vital that businesses have the necessary information and documentation in place to assist in the process of collecting payments.  Documents like contracts and credit policies, for instance, can go a long way in reminding customers of the terms of the credit arrangement and schemes of payment.   Stricter protocol on credit should also be put in place to reduce the likelihood of extending credit to clients incapable of paying on time.


Though it may be awkward for everyone concerned, making a collection call or following up payments remain at the forefront of ensuring that payments are made.  It immediately provides feedback and allows for some degree of flexibility to reach a compromise when the situations demand it.


Finally, businesses should not hesitate to call in the services of a collection agency should the customer prove rather difficult to collect from.  Far too long a delay may make further attempts at collection difficult.   Having a competent collection service on call can prevent further losses to delayed and missing payments down the line. 

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Brennan and Clark goes beyond collections in providing clients with the needed assistance to secure cash flow and eliminate credit losses.  For more on the company and its services, visit this Linkedin page.

Non-dischargeable Debts: Financial Obligations not Discharged by Chapter 7 Bankruptcy

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Some individuals and businesses overwhelmed by debt consider filing for bankruptcy to make a fresh financial start. However, while bankruptcy covers most unsecured debts, a bankruptcy discharge does not eliminate all debts and financial obligations.

Non-dischargeable debts are a type of debt that are not eliminated even when an individual has filed for bankruptcy. The following are some examples of non-dischargeable debts in Chapter 7 bankruptcy:

• Domestic support obligations. This includes child support, alimony, and maintenance.
• Legal fees from child custody and child support proceedings
• Debts incurred through a divorce decree or settlement agreement
• Court-ordered restitution, penalties, and fines
• Debts resulting from personal injury or wrongful death lawsuits while operating a vehicle under the influence of alcohol or drugs.
• Debts from willful and malicious conduct resulting in injury or death
• Taxes and tax liens
• Student loans and benefits
• Unlisted or unscheduled debts
• Debts that were deemed non-dischargeable in a prior bankruptcy filing
• Debts incurred by fraudulent means
• Some types of condominium dues, such as Homeowner's Association (HOA) fees

In Chapter 7 bankruptcy, certain non-dischargeable debts are given priority over other types of debts. If a debtor has turned over assets or property to a bankruptcy trustee for liquidation, the resulting disbursement will go toward priority debts first. Some of the most common priority debts in Chapter 7 are income taxes due within three years of the bankruptcy filing date, claims for personal injury or death and spousal and child support obligations

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Chapter 7's automatic stay prevents collection actions against debtors by creditors or debt collection agencies, but only until the bankruptcy proceedings have concluded. Creditors can try to petition the courts to lift the stay if it no longer appears to serve its intended purpose.

To learn more about debt repayment and alternatives to bankruptcy, subscribe to this Brennan & Clark blog.

The Don'ts of Business Debt Collection

There is a wealth of literature about collecting debts from late-paying clients. And while many of these tips have proven effective in recovering debts, business owners still need to be apprised on how not to collect payments, probably because most of the guidelines are common knowledge. Still, when they have exhausted all means to collect payments from late-paying customers, some are bound to commit costly mistakes in debt recovery efforts.

Owners of small and medium-scale businesses relying on payments to keep their operations and cash flow healthy should avoid the following mistakes in managing their accounts receivable:

• Incorporating additional fees or hiking up interest: Some business owners who have had enough of their delinquent customers slap on an additional fee or a higher interest, which they deem justifiable given the anxiety and stress they face chasing payments. However, doing so could just exacerbate the problem, with clients completely disregarding the penalties and the debt. It is best for business owners to adhere to their collection policies and terms no matter what.

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• Letting emotions get in the way: Business owners who tirelessly reach out to late-paying clients will at some point get frustrated. And when emotions run over, a host of new problems is likely to emerge. For example, a frustrated business owner who has to make the nth collection call could resort to threatening or harassing a client just to get payment. Doing so, however, could translate to legal woes that could be detrimental to the health of the business.

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• Waiting too long to contact a collection agency: If a business owner has exhausted all means to recover payment and still fails to collect, it is now time to hand over the responsibility to professionals. A collection agency like Brennan & Clark LLC can design a strategic plan that will maximize the chance of recovery.

Is your business plagued with delayed payments? Subscribe to this blog for more resources on the debt collection process.

Business Debt: Assessing The Need to File For Bankruptcy

Whether in using up credit lines or applying for bank loans, most businesses often incur debts as part of their operations. Not all companies, however, have to capacity to fulfill their obligations to their creditors.

This is the reality and sadly, many businesses file for bankruptcy as a means to redress their debts. Although bankruptcy can always be considered, it needs a lot of thought and effort on the part of the borrower to chip away financial obligations little by little.

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First, there is always a distinction among different kinds of debts. Some debts are held at much better esteem than others. That said, businesses should always reassess their financial standing with special focus on their credit standing vis-a-vis business performance.

For example, if current debt contributes to improved operations and therefore brings increased income, then filing for bankruptcy can be considered “premature” since the business is still earning from the debt incurred. Bankruptcy should be filed during hopeless cases, i.e., when debt has eliminated the income potential of the company.

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Although filing for bankruptcy may offer many advantages such as wiping out certain debts, it can also mean, depending on the contract, returning properties to the creditor. This rule is applicable to “secured debts” or loans such as car loans and mortgages, wherein personal property have been put up as collateral for unpaid loans.

Before filing for bankruptcy, financial obligations must be addressed in a strategic way. There are many options for restructuring debt or paying it off slowly. Companies that mediate for debt solutions between creditor and borrower could also be tapped.  

Brennan & Clark is a collection agency that offers customized receivables support solutions to businesses. Follow this Twitter account to learn more about the company.