This comes to us from Jocelyn Nager, Esquire who specializes in helping you collect from customers who have outstanding invoices too long. It’s great wisdom every small business owner should read.
Everyone is officially back to business, seeking opportunities and trying to close new deals. Focus on collecting your receivables and you will not have to “sell” as much.
This is because of bad debt’s multiplier effect on sales. In order to compensate for receivables not collected, sales needs to increase by a percentage relative to your profit margin. This chart illustrates the multiplier effect.
For example, “XYZ Company” had annual sales of $50 million, operated on a 5% profit margin, but wrote off 3% to bad debt. While “XYZ Company” had $2.5 million in profit, they were also losing $1.5 million each year.
At the same 5% profit margin, sales would have to increase by $30 million to cover the $1.5 million loss. In the current economy, a 60% increase in annual sales may not be an achievable goal. Focusing on collecting bad debt by outsourcing receivables to a collection attorney is immediately achievable, has a positive effect on your profit margin and keeps sales goals down to earth.
To increase your profit through cost effective debt collection, contact FFG&N.
FFG&N litigates, arbitrates, mediates, and forecloses on mechanics liens to get our clients paid when amicable efforts fail . Devoted exclusively to the collection of bad debt, FFG&N established in 1940, is a certified woman owned business.
They will go to bat for small businesses that are having a hard time collecting their receivables. What’s the big message? Don’t let your receivables get away from you.
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Download Cash Flow Management Whitepaper
If you haven’t done it already, download our cash flow management whitepaper.
It’s free. I wrote it because no one else was talking about this stuff.
If you run a small business, you need to read it. Fast and easy.
Tell everyone you know who runs a small business they should read it too.
In your corner as always,