• Xservice Debt Collection

Customer or Collection?

We had a business lunch with a wholesaler boss recently, his wholesale business used to be the top provider in its industry, generated hundreds of millions of sales each year, however it started declining from 2-3 years ago and heavily affected due to COVID (this is what the boss believes), although the industry keeps growing.


The wholesaler boss adopted a strategy along past year, that is to minimise debt collection even though customers’ accounts are seriously overdue. The reasons behind, as what he explained is that it is more important to keep customers rather than collect money, as he thought send outstanding invoices to debt collectors may break up their customer relationships, and all he wants is sales.


Interestingly, the business cannot keep selling to customers with 60+ days overdue because of their trade credit insurance policy, as the policy strictly prohibits selling to customers with 60+ days overdue accounts and the overdue will not be covered if the business does so. Therefore, all they can do is to chase money themselves, if customers not paying back, stop selling and go ahead to chase money internally.


This is not a wise strategy as their sales still declining after adopted this strategy. In addition, bad debts become more and more due to its internal collection does not work as effective as professional debt collectors, and the success rate became lower even though they finally send it to debt recovery agency, the winning rate dropped from 80% to 50% or even lower due to their late actions, this strategy (minimise debt collections) drives the business worse and worse.


We believe the root causes of business declining is not due to debt collection, amend the collections procedure could only getting the business worse. No matter how sales go, keep a strategic way of credit management is a must. Not pursuit to debt collection when overdue hits, will not help business at all.


Considering the special demands from the wholesaler boss, Xservices designed a ‘trade & collection’ strategy to meet such request, that is to strategically collect outstanding receivables without sacrifice sales (or even generate more sales) while obey to the insurance policies.


Do you face similar situation? Would you like to know more about how can we collect money back with even more possible sales? Get in touch now to book a free consultation session.

Need more advice about debt collection? Read our blog “Case study for Mr J


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