Debt Management Service

Debt management is one of the most critical tasks businesses need to handle. Proper management reduces bad debt and boosts cash flow. Some companies prefer to manage this task in-house. However, others use third-party debt management services to ensure a job well done. Which one of these options is right for you?

What Is Debt Management?

Debt management involves overseeing and collecting payments on debts owed by individuals or businesses. This involves creating a payment plan, working with creditors to lower interest rates, and negotiating terms for repayment. When customers fail to make payments, creditors might turn to more severe actions, such as penalties, fees, or litigation.

What Are Government Debt Management Services?

This is a fairly common question, but technically, no such thing exists. Debt management service providers register with government agencies and must follow regulations in their respective service areas. However, there are no debt management or collection services provided by government agencies.

There are, however, debt management products and services that government agencies can use to pursue payment. Private companies use these same services, such as accounts receivable automation. Software providers must meet strict requirements to be eligible for use by government agencies.

Why Is Debt Management Important?

Financial solvency depends heavily on a company’s ability to collect on debts owed. A company that cannot convert invoices into cash will then struggle to cover its financial obligations. If this trend continues, it will default on its loans or might struggle to pay employees.

Once a company begins to struggle financially, it will have a greater need for credit. Unfortunately, it will also become a riskier borrower to creditors. That can result in high-interest loans that create a cycle of financial difficulties until resolved by proper debt management.

Here are some additional reasons companies should invest in receivable management services and debt collection:

Steady cash flow makes it easier for companies to plan for the future and take advantage of lucrative opportunities that arise.
Steady cash flow reduces expenses by reducing the need for companies to use credit that will attract interest.
Good debt management saves the company time and money it would otherwise need to invest in chasing invoices.
Ongoing debt management reduces the need for stricter debt collection actions that could strain customer relationships.
Financial security ensures job security for employees who will now feel more comfortable remaining with the company and building a long tenure.

How Can A/R Automation Improve Debt Free Management Services?

A/R automation is a broad term that refers to the use of software to manage accounts receivable. This can include anything from streamlining invoicing to automating payments. A/R automation can also help with debt management in the following ways:

Keeps track of customer payments and payment history
Automatically identifies late payments quickly
Reduces the amount of time and resources needed to chase payments
Generates reports that give visibility into the receivables process
Offers customizable payment plans that help customers stay on track

These benefits help companies keep accounts receivable services in-house and eliminate the need for third-party debt management. This, in turn, makes it easier to ensure data privacy. It also closes the additional access point to personal data that third-party providers can create. Book your Gaviti demo to see how it can transform your debt collection services and exceed your needs.