Why should businesses be concerned with collecting monies on time?

Even the best customers/clients can suffer reverses which may affect their ability to pay within terms and possibly not at all.

Past due monies inhibit sales or providing additional services. For example, a customer that is approved for a $10,000 credit line and is past due $5,000 at best only has the opportuntity to purchase another $5,000. A client that a business has performed a service and the business is not being paid is limiting or eliminating future services the client may need from the business reducing revenue and income potential for the business.

A dollar today is not worth a dollar three months from now. Past due monies lose value the longer the money is past due. For example, $1.00 that becomes one month past due is worth $.94 cents, 2 months past due $.85 cents, 3 months past due .74 cents, etc.

Past due monies represent monies that are not able to be used by a business to produce sales or services from which the business earns more profits. The inability to use funds frozen in past due accounts may mean a company may have to borrow money. Obviously, borrowed money has an interest cost associcated with it.

Businesses bargain with customers/clients to sell merchandise or provide services on credit for which a customer promises to pay for within the credit terms of their account. Past due money does not represent merchandise or services sold on credit but merchandise or services a customer/client has converted to money. A business did not bargain to lend the customer/client money but only to extend credit for a reasonable period of time as a convenience or service to the customer/client.

Lastly, the buy/sell relationship gives a business the right to expect to be paid on time and in full relative to the credit terms extended. When a customer/client fails to do so, it is not only a right but an obligation as guardians of a company's financial well being to contact a customer/client to determine why a debt is not being paid. The job of a collector is to collect past due monies, to collect them promptly, and to collect them in such a way goodwill is maintained where desired and sales/services promoted whenever possible.

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