Extending credit to your customers is an important part of growing your company and creating customer loyalty. However, failing to collect on debts in a timely manner can open your business up to financial risk and result in lost income.
As a business owner, you should understand why regular payment is essential to your commercial success.
Inconsistent cash flows
Healthy and consistent cash flows ensure that you can replenish inventory and supplies as needed and pay your own creditors on time. When your accounts receivable become unmanageable, you may have trouble predicting cash flows and guaranteeing you have funds available when you need them.
When you fail to pursue collection, you signal to customers that they do not have to pay their bills, making it increasingly unlikely that they will in the future. It’s essential that your set expectations with the people you extend credit to.
Statute of limitations on legal action
In Ohio, you have a limited amount of time to sue a borrower over a past-due bill. Though it varies, the statute of limitations for many types of debt is six years from the date of the debtor’s last payment. After this date, you can no longer take legal action to collect on the debt. Delaying your debt collection practices may mean that you never receive the uncollected amount.
As a business owner, you should develop and employ consistent debt collection practices. In some cases, legal action may be necessary to ensure your debtors make their payments.