Every business large or small that provides credit to customers (delivering products or services then invoicing after) will eventually have a customer who cannot or will not pay.
Depending on what industry you’re in, this could happen very regularly.
So along with all the other tasks you have to complete now you also have to waste time and resources chasing up unpaid invoices.
One option to save you the hassle and improve your chances of recovering the debt in full is to hire a debt collection agency. You may have already considered in the past.
But for many years there has been a negative stigma around debt collection agencies and a number of myths that often scare small business owners out of hiring a professional debt collector.
This article will answer some of the common myths and explain how engaging a quality debt collection agency can save you time, resources and money.
1. Debt Collectors Are Only For Large Corporations
You may believe that only multi-billion dollar telecommunications or utility companies can use debt collectors to follow up on unpaid accounts. But this is simply not true.
Nowadays many debt collection agencies specialise in small to medium sized business debt recovery. Working as an outsourced debt collection contractor when and if you need them.
2. My Debts Are To Small
Many debt collection companies will accept one off debts as small as a few hundred dollars. If you have multiple debts or are regularly chasing up unpaid accounts you can get a membership that reduces the fees you are charged.
3. Debt Collectors Are Expensive
They can be, but if you do your research you can find professional debt collectors that work on a No Recovery, No Fee arrangement. This means you don’t pay a cent and the debt collector gets paid a small percentage of the funds they recover for you, only if they are successful. So even if you think a debt is unrecoverable it’s wiser to refer the debt to a collection agency and see if they have more success.
Also if you have clear terms of trade your customer can be legally required to pay any fees and cost associated with debt recovery and legal action.
4. Debt Collectors Harass People
In days gone by the debt collection industry has had it’s share of negative publicity, some of it justified due to late night phone calls, unfounded threats of jail time if debts are not paid and so on.
But in recent years the industry has undergone a massive overhaul and is now tightly regulated by the Fair Debt Collection Practices Act, which has very strict rules about when, where and how they can contact debtors and the processes they must follow.
Take your time to research a reputable company that has been around for many years and follows industry standard best practises.
5. I Will Lose Customers
Everyone knows that if you purchase a product or service that you are expected to pay for it. Hiring a debt collection agency simply takes the hassle off your shoulders and lets a professional take care of it.
Also if customers are refusing to pay their bills then they are costing you money anyway and you should be happy if they decide to do business with someone else next time.
It also shows customers that you are organised and professional and that they must pay their invoices otherwise further action will be taken. You don’t want word getting out that not paying your invoices is ok.
6. I Should Wait Until An Account is Severely Overdue Before Contacting A Debt Collector
They earlier you contact a debt collector the better chance you have of recovering the funds in full. Debts that are 30+ overdue are much more likely to be recovered than 90+ days overdue, so after a couple of friendly reminders go unanswered then contacting debt collector early is usually the best option.
7. My Debt Is Too Old To Send To A Collection Agency
This may seem to contradict the previous point, but any debt that is under 12 months??? old can be referred to a debt collector. Even if you’ve tried every approach you can think of a debt collector will still have a much better chance of success.
Firstly a customer will instantly take a debt collectors request for payment much more seriously as they know they can lodge the unpaid debt on their credit history. Also debt collectors have resources, experienced personnel and proven systems to give you the best odds of successfully recovering your debt.
8. Lawyers Are Better At Recovering Debts
Yes if a debt collector has exhausted all their options without success then a solicitor who specialises in debt recovery will be able to proceed with legal action to recover your funds.
But now there are many debt collection agencies that employ in-house solicitors and can assist you from start to finish so you only need to deal with one company, yet still have access to the full range of experts to help you, even if the matter does end up in court.
If chasing up unpaid invoices is draining your time and resources then talking to a quality debt collection agency can help you find a solution that work right for you business and saves you time and money.