“Who ya gonna believe, me or your lyin’ eyes?” – Chico Marx in Duck Soup
Your collection agency is a valuable business partner. When you hire a collection agency, you do so not only to improve your cash flow by recovering bad debt, but also to save you time. A collection agency focuses on only collecting bad debt, and they have the tools and skills needed to do so.
So, let them do their job. While collecting bad debt is not magic, there is an art to it, and it is not for everyone. I believe that you should try to collect bad debt on your own, but if you have not been successful in 90 days, bring in the experts.
Once you place the file with your collection agency, trust their advice. In many cases, they have done research and they know the best way to get the job done. Since collection agencies work with a contingency fee basis, the are certainly going to advise a strategy that has the best chance of getting you paid.
Here are a few examples from our files:
Our client is owed $5,000. Their customer is a sole proprietor with a small business and assets. We have researched and know that he is getting ready to retire. He also owes a great deal of money to other creditors. Our advice was to proceed immediately to Small Claims Court to obtain a judgment and secure their debt. It is frustrating to me that my client, who hired me to recover bad debt, is uncertain, and wants to take some time to think about it. I am not sure if the wait is because it means they will recover a little less money, or if they are worried about going to Court, but I hope they decide soon so that we can act. If we do not move now, we will wind up behind many other creditors, or the customer will sell his assets and move away, and there will not be anything to collect
For another client, I recommended Small Claims Court again, because the debt is almost 6 years old, and about to age beyond the statute of limitations. He has not responded to any requests for payment. He appears to have the means to pay the bill. I laid the facts out to my client and he told me to go ahead, because he trusted my experience and knowledge. He sees the collection of the file as our mutual goal.
There you have it – two very collectible files – one that will pay and another that may go by the wayside.
An aging receivable is not worth anything unless it can be converted to cash. Your collection agency knows how to do that. They would never tell you how to sell your product or deliver your service. So, when your lyin’ eyes tell you the bad debt on your books is valuable, don’t believe them.