Candela Laser

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The age of a receivable is the number one determining factor if the receivable will pay, and how quickly the receivable will pay. In other words, the rates in which accounts are collected are determined mostly by the company placing the accounts rather than who the accounts are being placed with. Obviously, the methods an agency uses when collecting on an account will play a huge role in whether or not the account will pay, but understand that the same collection process is used no matter the age. Yet, aged accounts historically have a lessor chance of recovery. Well what defines an aged account? This definition is up for interpretation, but considering the FDIC acknowledges account receivables management past 90 days no longer assets rather liability’s, accounts over 90 days can be considered aged.
Let’s take a moment to ponder why aged receivable have a lower rate of recovery. The central reason accounts are delinquent is simple. Cash flow issues. The company’s that owe are typically having financial problems. As that account ages, the likely hood of the company’s financial situation improving are rare. According ...
... to the SBA, small business’s make up over 99% of U.S. employer firms and according to the Census Bureau roughly 600,000 businesses are closed each year. That is roughly 10% of all business. So in many cases, nonpayment is due to a business closing or filing bankruptcy. Unfortunate, for unsecured vendors and some secured vendors, when a receivable reaches this point, there is no way to recover the money. In many cases debtors are more protected than creditors. We find that about 10% of aged accounts are out of business or bankrupt. Well what about the other 90%? Not all aged accounts go unpaid. See the chart below. Collection attorney

So if an account is still in business why non-payment? That’s the million dollar question. Each account is unique in its own way. In some instances the invoices are being disputed, but MOST disputes are a cover-up for a cash flow problem. The debtor feels that if it passes the blame to the vendor maybe they can get themselves out of the debt at a lessor amount, or not pay all together. These cases are rare.
In most situations the debt is going unpaid because the vendor is simply not a priority. What we have found, the older the account, the more difficult it becomes to make the owed invoice a priority. When a company is having cash flow issues, it is all they can do to pay vendors that helps their business operate. If a vendor supplies a company with a product or service on credit terms, and that account falls delinquent, the company that owes the money will have to go elsewhere to get the same product or service. We call this credit hold. There simply isn’t enough money to pay a business that will not monetarily benefit the other business. If the vendor acts fast, there is a better chance to recover the money owed AND have the debtor request more product or service in the future. This in turn generates more revenue. So if age is the number one determining factor if an account will pay; then age should be the number one factor in determining which accounts should be placed for collections. account receivables management