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Where accounting meets debt collection

An accountant's perspective


Written by Neo Phetoe (Legal Secretary, BCom Accounting, PGDA candidate)


One of the roles of an accountant is to manage the cash flows of a business in order to

ensure that the business is financially stable. Unfortunately, there are factors that may

have a negative impact on the cash flow of the business and one of those is bad debt.

Bad debt is the amount of money that customers owe and is unlikely to be paid.



Many businesses rely on cash flow to fund their day to day operations, however if some of the debt owed to them remains unpaid it has a negative impact on the financial stability of the business.

Cash flow management is important in making sure that a business stays afloat, therefore many companies have an internal team that manages cash flow by following up on payments and collecting overdue debts. Collecting overdue payments can be time consuming as it takes away resources from the business. Companies employ many strategies in the process of recovering debt from customers such as sending payment reminders, making phone calls, sending letters and emails and this can be costly. The older the debt gets, the harder it is to collect. When the internal team of a company has exhausted all its efforts trying to recover payments, the next best step would be to enlist the help of a debt collection agency.


Hiring a debt collection agency gives the business a greater chance to recover overdue payments and therefore allows the business to focus on bringing in revenue and not chasing after debtors. Collection agencies collect overdue payments on behalf of creditors for a fee. Some agencies buy overdue accounts from creditors for a fraction of the total amount and try to collect the full amount or as much as they can. Collection agencies are effective when it comes to collecting overdue payments because they are aware of the tactics that debtors use to avoid paying their debts, so they know how to handle each situation.


Debt collectors do more than what the internal team of a business can do to recover overdue payments as the main focus of a collection agency is pursuing debtors to make payments unlike the internal team which focuses on many other things. If debt is not collected and is written off then this has a negative impact on the cash flow of the business and ultimately the profit. Debt collectors add value to a business by applying their knowledge and skills to recover overdue payments and by that they mitigate the risk of bad debt.

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1 Comment


Matshepo Mbele
Matshepo Mbele
Feb 19, 2024

Such an interesting read.

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