Small business owners struggle with bad debt recovery. First it really stinks not to be paid. secondly, it further stinks to have to spend time in-house attempting to get customers to pay. finally, it absolutely stinks to have to hire a collection agency and pay them to collect your money for you.
For most businesses, non-paying customers are a fact of life. Business owners must decide how much of their time and effort to devote to bad debt recovery, and when it is time to bring a collection agency in to assist. The desire to avoid collection agency fees should not be the only consideration, because there are enough agencies out there that finding a competitive rate should be easy. More importantly, delaying the decision to hire a collection agency can backfire, increasing collection costs and decreasing the likelihood of payment.
So when is the right time to hire a collection agency? The right time is different for every business, but here are some things to consider:
- How much time are you and your staff spending on bad debt collection? Can your time be used more effectively elsewhere?
- Have the customers in question made any attempt to settle with you or are your efforts being ignored? If what you are doing is not working, it is time for a new approach.
- Do you have intelligence about your customer that would indicate it is time to take new action? (financial difficulty, company going out of business, new ownership, etc?)
- Which delinquent customers would you like to keep and which will you terminate? You may wish to give a loyal customer more time – but not forever. Even the best customer can go bad. Know your limits.
Stay on top of your aging reports. Manage your accounts receivables and be proactive.
Looking to hire a collection agency but not sure where to start? We can help!