David Letterman fans take heart! We have our very own “Top 10 List” of sorts, although in this case, there are thankfully only five items on the list. Small business owners have cited these really bad excuses for not outsourcing their debt collection. Here they are, and our thoughts on why they are really are terrible, no good, awful, very bad excuses:
5. “I am too busy”
Too busy to recover money owed to you? Hiring a collection agency will not only save you time so that you focus on your business, but you can use the extra cash to hire some help.
4. “It’s too expensive”
An unpaid receivable has no value until it is converted to cash. There are lots of collection agencies out there, and it will not be difficult to negotiate an attractive rate. Be sure to use an agency that has not upfront or hidden fees, and is compensated with a percentage of funds recovered.
3. “I can do anything a debt collection can”
Collection agencies do a great deal more than make phone calls and send letters. A good deal of collection involves research, that is, finding debtors and their assets. Also, if you want, collection agencies can report bad debts to a credit bureau. They can also provide information regarding best practices for your in-house credit and collection practices. Remember that a collection agency focuses on collecting for you, whereas you have many job responsibilities. (See #5, above)
2. “If I am patient and wait it out, my customers will pay eventually”
How about the time value of that money, and it how you could be using it today to grow your business? Do you know that there is a statute of limitations on how long you can recover bad debt? Also, while you are waiting, your delinquent customer is likely incurring more debt, and may be selling assets, or having other more proactive creditors attach their assets. Wait too long, and there may be nothing to get.
And the absolute WORST reason not to use a debt collection agency is:
1. “I will lose customers”
How about the time value of that money, and it how you could be using it today to grow your business? Work with your collection agency to identify slow paying customers that you may want to take back once the debt is paid. Find a collection agency that is professional (get references) and one that will work well with your company’s philosophy. You may find that the collection process, seeing some people through hard times, might make customers come back to you and remain loyal for years!