5 reasons to collect your debts before the accounting close
The end of the year is approaching and with it perhaps its share of stress and worries regarding the management of the annual accounting closing of your company.
Frequently asked questions from managers who consult us relate to:
- Solutions to maintain tax compliance of accounts,
- The fair assessment of the company’s performance to make informed decisions the following year,
- Effective financial management and good communication with stakeholders,
- Guaranteeing the stability and viability of the company in the long term without overburdening or putting financial and accounting teams in difficulty.
But debt collection is an element often neglected on their part and which can nevertheless prove decisive in the painless success of the exercise . We’ll explain it to you.
Recovering your receivables before the accounting close is a common practice in financial and accounting management for several important reasons:
The 5 advantages of recovering your unpaid debts before the annual accounting close
Uncollected receivables represent money that is owed to the business but has not yet been collected. In other words, it is the turnover which has been invoiced but which has not yet been collected.
1) Have cash quickly
During the accounting close, it is crucial to ensure that receivables are collected quickly to ensure the availability of liquidity necessary to finance the company’s operations.
2) Have fair financial statements
Uncollected debts can distort the company’s financial statements by artificially increasing revenue and assets. This can give a false picture of the financial health of the company. When closing the accounts, it is therefore important to carry out a realistic assessment of doubtful debts (risk of non-payment on invoices issued) and to record them accordingly.
3) Improve financial ratios
Unpaid receivables increase the entire company’s WCR (receivables), which can reduce liquidity and harm financial ratios. By collecting your receivables before closing, you can improve cash flow and financial ratios such as current ratio and accounts receivable turnover ratio.
4) Avoid losses and reduce risks
The longer you wait to collect your debts, the greater the risk that they will become uncollectible . By acting quickly to collect overdue debts, you reduce your risk of financial loss.
5) Be tax compliant
The accounting treatment of your receivables may have tax implications. It is important to comply with current tax regulations to avoid penalties or delays in paying taxes.
Why outsource debt collection?
Entrusting your unpaid debts to a collection company like ours can be the key to preparing your accounting closure painlessly. Here is the list of benefits:
1) We preserve your customer relationships
As you know, debt collection can also have an impact on customer relations . Our professional and respectful approach to your debtor clients when collecting your debts can help maintain good commercial relations with them.
2) You stay focused on your core business:
Mandating GESTION CREDIT EXPERT means choosing to work on your primary missions rather than devoting resources to the management of overdue debts.
3) We obtain better recovery rates for your cash faster
We have been specialists in amicable and legal debt recovery for over 50 years. This is why it is very likely that we will obtain better and faster results than you when we call your debtor customers to demand payment of your debt.
4) You reduce the stress on your finance and accounting teams
Managing overdue debts is very time-consuming . By outsourcing this function, you ensure that your receivables are processed in a timely manner, and you significantly reduce your stress during this annual closing period which is so crucial for your business.
In summary, debt recovery is a vital process for the financial stability of your business, and it must be properly managed during your annual accounting close to ensure the accuracy of your financial statements, the availability of your liquidity, the management of your risks and the tax compliance of your accounts.
Proper debt collection planning and execution is essential to maintaining the financial health of your business.
They will also allow your teams to approach this period with complete peace of mind.