Manufacturing Debt Collection

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Debt Collection for the Manufacturing Industry

Manufacturers throughout the United States are unfortunately met with the challenge of collecting on past due invoices daily. Failing to collect on past due accounts can be detrimental to growth and success, which in turn, can lead to solvency of the business. Manufacturing companies are not exempt from this risk. Too often when faced with the challenges of collecting past-due debt, companies will spend resources, time, and effort to collect, even further exasperating the problem when they are not successful. The key to being successful in recovering delinquent accounts for a manufacturing company is having the knowledge and experience to navigate the complex issues that cause these debts.

Debt in the manufacturing sector can be the product of many catalysts and understanding the issues that caused the delinquency in the first place is paramount to a successful recovery. In most transactions between manufacturers and their clients, there is an extension of credit where finished goods are shipped, and payment is expected after a net period has passed. In the manufacturing sector, the time from an invoice being issued to the time an invoice is paid is significantly longer than other industries for a variety of reasons. Research published by Forbes showed that 12 out of 20 of the longest Collection Agency Service cycles were in this sector with average A/P time decay being between 38.5 days and 44 days, and that is just counting on-time payments. This can be attributed to the fact that many distributors and retail clients of these companies rely on floating the debt in hopes that they are able to sell the goods purchased to pay their suppliers. When faced with weak sales, they are often unable to obtain the capital needed to resolve their obligations. In addition to this many distributors and retailers have delicate and complex supply chains that can cause chaos in projecting revenue.

The damage that is caused by an unpaid invoice in the manufacturing sector can be drastic. Most manufacturers operate on razor-thin margins, especially as the global economy has provided end clients access to foreign markets where labor costs are low and environmental regulation is nearly nonexistent. In a study conducted by NYU that examined the profit margins of manufacturers, nearly all the producer’s net margins below 20% were electronics 5.7%, healthcare products 9.27%, machinery 9.62%, and semiconductors 15.92%. With margins this low, one unpaid debt would require nearly nine times the revenue from new sales just to make up the loss incurred, forgoing all profit. When multiple defaults occur, this can be the death knell of even the largest manufacturing companies. On January 5, 2020, Borden Dairy Company filed for bankruptcy protection citing declining profit margins in the dairy industry and defaults as a primary reason for filing.

Fortunately, however, the utilization of a third-party debt collection agency can provide businesses in the manufacturing sector the protection and relief that they need to avoid becoming the next Borden Dairy Company. Our agents are trained to utilize various tools when addressing these issues. The agents handling a claim will focus on identifying the cause of the debt, explore remedies to cure the issues, and when appropriate, use leverage to incentivize the debtor into resolving the matter. Unlike other agencies that use cookie-cutter demand letters and scripted agents, often in overseas call centers, our agents thoroughly investigate the claims to ensure that no stone is left unturned in securing payment. When a company still refuses to address the obligation, we have a network of collection attorneys that will not only litigate the claim, but collect through garnishments, liquidations, and other court remedies that force a recovery.

In addition to recovering the debt, there are also other factors that make selecting the right company when using a collection agency. On top of being taught collection tactics, our agents are also versed in business etiquette and conduct to ensure that our clients are being represented professionally and that their customers are being dealt with respectfully. In times where anyone can write a yelp or google review, it is vital that manufacturing companies are represented by a collection agency that conducts business professionally.

If you are a manufacturer that is currently faced with the problem of collecting on a delinquent debt, contact our office to speak with a specialist to discuss your collection needs. Unlike other companies that will simply provide a standard quotation and a slick sales pitch, our intake specialists will consult with you to better understand the challenges that you are facing and devise a plan and pricing option that will serve your needs. Your focus should be on the development and growth of your business and not chasing unpaid invoices. The manufacturing sector is highly competitive and allowing our expertise to aid you in the recovery of your past due accounts will not only increase recovery rates, but provide you with more time to devote to your business.

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We are experts at collecting debt previously deemed “un-collectable debt”.