What is portfolio collection? Its impact on cash flow

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The term cash collection should be very present when we want to evaluate how well a company's cash flow is going. After all, the application of effective cash collection strategies will determine whether an organization has the necessary liquidity to meet its obligations on time, as well as having the availability of resources to finance its growth.

As part of the strategies to improve portfolio collection indicators , it is crucial to have collection management software . Thanks to this technology, it will be possible to reduce human errors, optimize the collection process and have key management indicators at hand and up-to-date, in order to make intelligent and informed decisions.

In this post from Moonflow, the debt collection system , we tell you buy uae email database about portfolio collection , how it impacts cash flow, and how your portfolio collection procedure can be improved.

What will you find in this text?

What is portfolio collection?

What is the impact of the portfolio collection procedure…?

How to make a good portfolio collection?

1. Have well-defined credit and collection policies

2. Define and plan your debt collection communications strategy

3. Identify in time customers with a predisposition to default

4. Offer incentives for early payment of debts

How can collection management software help?

What is portfolio collection ?
Portfolio collection is the process by which a company obtains, with its own resources (managers or collection area) or those of third parties (collection companies), the payment of its clients' outstanding debts.

What is the impact of the portfolio collection procedure on cash flow?
Basically, effective collection of the portfolio will determine whether the company obtains the money it needs to meet its payment obligations (payment to suppliers, workers, etc.). If what is owed is not collected on time, the company will not have liquidity or profits, which would jeopardize its permanence in the market, in addition to causing other problems.

Example of how collection affects cash flow
Let's imagine a furniture manufacturing company that sells to retail stores. If these stores don't pay their bills on time, the furniture company could face problems paying its own suppliers of lumber, among other materials. It could also have difficulty paying its employees' wages.

How to make a good portfolio collection ?
Now that you know the importance of accounts receivable collection and how it impacts a company's cash flow, you're probably wondering how to improve your accounts receivable management. Here are some tips that will help you:

4-Automate your debt collection management-banner

1. Have well-defined credit and collection policies
This is a measure that will help you prevent the granting of credit to risky clients. And it will also help you determine the terms for granting credit according to the client segment, type of product or sales channel. On the other hand, the policies can also include guarantee clauses so that your company is protected in case of late payments.