Now as hideous as hounding people for money is, there are seven hidden ways in which your overdue accounts are killing your business.
7 Deadly Debt Drains Bleeding Life And Joy Out Of Your Business
Deadly Debt Drain #1: Communication Costs. The first cost of chasing overdue accounts is the actual expense of communicating with your debtors. The paper, the printing the stamps the phone calls. They’re like drops of a dripping tap… each drip appears small and insignificant but left unchecked they drain your profits insidiously. A client was recently looking to trim back expenses and was shocked to discover that he’d spent over $7,683.35 in direct communication costs trying to recover overdue accounts in the past 12 months. And that didn’t include debt collection agency fees. So while it’s easy to turn a blind eye to individual communication costs, know that they gouge a big chunk of your profits year in, year out.
Deadly Debt Drain #2: Employee Wages. On average businesses spend 9.5 hours every week managing their overdue accounts. Even paying someone a basic $12 per hour wage, that ads up to $5,928 ever year. Now I’m sure you’d agree that six grand would be better off in your pocket than spent chasing bad debtors.
Deadly Debt Drain #3: Lost Opportunity. Even greater than employee wages is the opportunity lost by employees chasing debtors rather than drumming up business. Imagine the impact on your cash-flows if a staff member invested nine and a half hours a week following up customers on the phone; cross-selling them other products or services; stimulating referrals. By tying up your employees time chasing accounts you’re flushing tens if not hundreds of thousands of dollars down the drain.
Deadly Debt Drain #4: Lost Productivity. Similarly, every minute you waste personally dealing with overdue accounts is a minute you’re not producing. Now as the business owner your time should be worth considerably more than a measly $12 per hour. You’re the principal money earner and you’re time is too valuable to waste even a second chasing overdue accounts. So when you waste hours of your precious time chasing debts, not only is the hourly rate significantly higher than that of your employees, you’re also neglecting your highest money-producing tasks. The net cost of this to your business is virtually incalculable yet you can be sure it’s massive.
Deadly Debt Drain #5: Emotional Cost. With the exception of some pretty rare individuals pretty much everyone absolutely hates chasing people for money. Not least because of all the lies and abuse that you’re subjected to in dealing with these people. Now this might sound a bit airy fairy but all that negative energy, all that anger and frustration… a fair whack of it gets passed on to your accounts manger, darkening their mood and in turn infecting your entire business. Now before you scoff, take a second to imagine you’re being verbally abused. If you’re like most people you’ll feel angry and violated and you’ll carry those emotions for days. Festering in this state your performance, your decision making and your relationships (both at work and at home) will all suffer. So if that’s how one abusive incident can impact your life, what’s it doing to the person who deals with abuse daily as a regular part of their job? Again, this is a cost that’s virtually impossible to quantify but don’t kid yourself that it doesn’t eat away at your profits at multiple levels each and every day.
Deadly Debt Drain #6: Impaired Growth. As you know, cashflow is the life blood of every business. Without it your business will struggle to survive let alone thrive. But with your money tied up in unpaid accounts, your debtors are effectively choking your cash-flows and in turn suffocating your growth. Again, this is a cost that’s practically impossible to gauge but understand… having your money tied up in unpaid accounts is devastating your wealth and ultimately your financial security.
Deadly Debt Drain #7: Un-Recovered Debt. The final hidden cost of overdue accounts is the actual loss of income that results from uncollected debts. You see most business owners hold on to their debts way too long. And if there’s one debt recovery law that’s set in stone it’s the longer an account remains unpaid, the less likely you’ll ever see a cent of it. So by ineffectively chasing debts in house for months and sometimes even years you’re needlessly kissing away money that you’ve worked so hard to generate. And while it might sound crazy, it’s a mathematical fact that failing to recover a $1,000 debt is the same as losing $12,500 of new business..
The Quick And Easy Solution Now before you get in your car and look for a bridge to jump off there is actually a silver lining here. The good news in all of this is that there is one and only one root cause to all this loss taking place in your business and that one cause can be quickly and easily eliminated in one step.
What’s the sole source of all this loss? Your lack of a powerful, efficient and effective highly systemised process to recover debts. Now if you lack such a system don’t beat yourself up about it. You’re in the same boat as 99% of businesses and frankly it’s not your fault. After all, who’s ever shown you how recover your accounts properly? However, by having a simple, affordable system working for you in your business you’ll instantly eliminate all the headaches and hidden costs that are holding you back once and for all.
Angelo Ioanides Publisher of the world’s only free online multi-media debt recovery training course for business owners Dr Angelo Ioanides (a.k.a. The Debt Doctor) is a leading authority in accelerating and magnifying business cash-flows. For anyone looking to recover their debts in-house faster, more affordably and with dramatically less stress than they’ve ever experienced The Debt Doctor urges that you take advantage of his free online training course. To discover what’s revealed in this powerful online course visit The debt Doctor’s debt recovery blog.