In business, nothing is worse than not getting paid. It is an insult, a slap in the face. Even companies with the best credit practices will once in a while feel the pain.
Businesses should certainly try to recover bad debt themselves. However it is not always possible, and oftentimes companies turn to third party debt collectors to recover the money for them.
If you have never used a collection agency before, or even if you have, it is important to understand what they should and should not be doing for you:
A debt collector SHOULD:
- Make it easy for you to submit business to them – Can you submit online? Is there a form or checklist to guide you?
- Give you regular reports on the status your accounts – Communication is key! You must also remember to let your agency know when you receive a direct payment so they can stop contacting that customer and focus on the ones that are still open
- Partner with you to help you improve your credit practices
- Help put money back into your business
- Research your customer files to find new contact information
A debt collector SHOULD NOT:
Be your means of “punishing” a non-paying customer. This is not about punishment. This is about getting you paid. Your debt collector should be persistent, but always professional. Many times companies we speak to are more interested in having an item reported to credit bureau than in actually getting their money. As we said in an earlier post, credit reporting may be a valuable tool in some cases, but it does not guarantee you will get paid.
Be considered “free labor”. Most collection agencies work on a contingency basis, which means they do not get paid until they recover for you. Some files collect immediately; others take a good deal of effort. Your take a leap of faith when you hire a collection agency, and they take a leap of faith that their efforts will be successful. Their success benefits you! While it would be impossible for an agency to tell you everything they are doing on every file, once again, communication is key.
As with all your business relationships, you should want to partner with your debt collector for the long term. With some realistic goal setting and open communication, to paraphrase Rick in the classic film Casablanca, it could be “the beginning of a beautiful relationship”.
Want to learn some simple steps you can take to reduce the number of files you have to send to collection? Click the button below to download our new tip sheet, “10 Tips to Minimize Bad Debt in Your Business”.
