Commercial Debt Collection – 4 Risks Owners and AR Managers Need to Be Aware of

Business-to-business (B2B) models, in particular, pose many unique challenges. Cash flow is the lifeblood of a business. Uncontrolled or overlooked negative cash flow can render your business unprofitable. Respectfully, four risks make commercial debt collection very different from collecting retail or consumer debt:

Narrow Customer Base Commercial Debt Collection

Many businesses serving other businesses have limited prospects, especially those serving niche markets or small industries. There are frequently only a handful of potential clients, many of whom know each other. Bad news travels fast, and mishandling accounts receivables or any other sensitive matter can negatively impact your brand and market share quickly. 

Trade-Specific Impacts

One day everything is thriving, and the next, your business could be fighting for its life. If your company sells products and services to any four B2B markets – producers, resellers, governments, or institutions, it is likely vulnerable to economic, regulatory and supply-and-demand related variables that can unexpectedly impact cash flow. These variables can affect an entire supply chain; thus, B2B businesses must have a high payment priority strategy to avoid being caught inside a recurring past due nightmare. Diligent monitoring and partnering with a best-in-class collection agency can distinguish between success and failure.

Make-or-Break Purchase Volume

Purchase volumes tend to be much more significant in the business-to-business world than B2C selling; for example, a million dollars in retail sales is often distributed amongst a substantial number of buyers. In contrast, in B2B environments, large sums of money may amount to only a small number of orders or frequently less than a single industrial manufacturer or distributor contract. One deal gone wrong can have immobilizing repercussions for a B2B vendor.

Difficult Negotiations

Commercial collections are often more complex than B2C collections. Negotiations with other businesses occur with trained accounts payable professionals acting under particular directives or the business owner themself. Techniques that may work well in business-to-consumer circumstances can pose catastrophic outcomes when dealing with an experienced entrepreneur hardened by multiple economic downturns or one who has weathered prior business failures and is currently facing new hardship.

In addition, losses due to a debtor business’s collapse are more difficult to recover because secured creditors, banking institutions and the Canada Revenue Agency are also trying to get paid.

Don’t accept bad debt as a cost of doing business in the B2B space. It simply doesn’t have to be that way. Reach out to my team of B2B collection agency professionals or me anytime!

Commercial Debt Collection