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Collection Agency: Focus on Recovery, Not Loss

Small business debt collection should focus on recovering as much as you can, not on how much you have lost.

When a customer does not pay you, the amount owed becomes part of your uncollected accounts receivables. It is, at best, a promise that you will get paid at some point. Some businesses can sell or borrow against their open receivables, an option only available for certain industries in specific circumstances.

Most of the time, small business owners do not have access to sophisticated factoring options, and have to find a way to manage their delinquent accounts receivables. All too often, they deal with them by ingoring them, or by holding on to them far too long before deciding to hire a small business debt collection agency.

As delinquent receivables age, cash flow tightens. For a small business owner with tight margins, it is upsetting. Many small business owners are heavily invested in their community, and consider customers like family, so when they do not get paid, it can feel like betrayal, and with betrayal comes anger.

At some point, you are going to decide that you are mad as hell and that you are not going to take it any more.

Small business debt collection then becomes a process based in anger and betrayal. Collection agencies usually work on a contingency rate basis, which means that they do not charge anything up front, but rather retain a percentage of sums collected as compensation. While small business owners like this approach because there is no upfront cost, they resent the collection agency “taking part of their money”

As a small business debt collection professional, I get it. It stinks when someone stiffs you. However, your collection agency is not your enemy. They did not cause the debt. They are trying to help you. When you hire a collection agency, you do so because you have nothing but an aging receivable, which is only a promise to pay. You have zero.

Focus on what your collection agency recovers for you. Something really is better than nothing. If you see more and more delinquent customers, take a look at your credit practices and refine them.

It is a process, and one well worth your time and effort.

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