Logistics Companies Failing Because of Failure to Collect Debt
Bad debts have made established companies fail due to reduced income flow. Logistics companies are profoundly affected by the inability to follow up late payments, which piles up, and over time, they have to write off these accounts incurring massive losses. In 2019, more than 600 logistics providers, in the trucking business, filed for bankruptcy. The move rendered over 2,500 truck drivers jobless. To understand why debt collection in the logistics industry is such a problem in the industry it is important to understand the underlying issues that ultimately cause the issues.
- Reacting Instead of Responding
Many logistics companies have acquired loyal clients that they trust they will pay their debts in time. In many instances, they operate on gentleman’s terms and they lack a plan to address the unexpected slow payments.
A reaction is an impulse communication that one has not reviewed adequately; thus, it can have negative consequences as the process followed might lack professionalism. A lousy approach means the company might fail to recover the debt. The best solution is using an information-based response that reflects reason and logic. Premeditated answers have vast details about a problem, anticipated effects, and the solution required. The response also brings out the organization’s real values, and it focuses on what their customers should do to address their balances.
- Poor Communication
Logistics companies are taking up modern technology to enhance service delivery and marketing processes. However, many organizations fail to use the technology in their accounts receivable efforts, which leads to inadequate payment communication with their customers. Logistics companies’ market rates have shrunk by 18%. Every single payment makes a huge difference. Therefore, the organizations must be persistent in asking for payments.
- Complicated Payment System
Some logistics companies have automated systems for collecting payments. Unfortunately, the processes are hard to navigate for clients who are willing to pay but may not have the appropriate credentials to access their payment systems. As a result, clients procrastinate when they lack relevant support, leading to overdue payments. Celadon Company was one of the largest players in the logistics sector. However, the company collapsed with more than $60 million worth of shareholders’ investment. Proper financial management would have prevented the loss of over 3,000 truck driver jobs.
- Waiting Too Long
Logistics companies offer services continuously to loyal customers, hoping that they will pay. By the time they realize that the payments are not forthcoming, it is usually too late, as the debts have piled up. When they finally try to address the issue it may be too late. In 2019, more than five leading logistics companies ran out of business or filed for bankruptcy protection. Oftentimes at the detriment of the company, customer relationship management does not want to be pushy; thus, they wait for several months before sending payment reminders. However, the best business practices allow logistics companies to ask for late payments.
Using Collection Agencies to Address the Issue
As many logistics companies face these systemic problems, many have started to turn to professional collection agencies for help. A collection agency pursues legal debts on behalf of clients in exchange for a pre-agreed commission. The agencies are motivated to use different strategies to recover late payments since their clients only compensate for successful debt recoveries. Debt collectors use a professional approach that protects the business relationship between a logistics company and its loyal clients. By using professionals to address their nonpayment issues logistics companies can secure their revenue streams and stave off financial troubles.