So, you have hired a collection agency to recover bad debt. Great! Now what do you do?

Outsourcing your bad debt collection agency to a third party can save you time and the money the agency recovers for you can improve your cash flow. There are things that you should – and should not – be doing – after you sent accounts to your collection agency.

DO stop doing business with people who owe you money.

Seriously, stop! This may seem strange, but we see companies doing it every day. Landscapers keep mowing lawns when they have not been paid in months. Fuel oil companies deliver oil on credit to customers with large balances. Why should customers pay for what you will give them “for free”? How seriously do you think your customer will take your agency’s collection efforts?  Here is an excerpt I received from a client, a subcontractor:

 Joe was a good source of business for me in the past, so when I did not get paid for a job, I called him. He told me that he would pay me as soon as he got paid. Then he told me about a large job he was doing and asked me if I wanted in. When he explained the size of the job, I gladly agreed to do the work. Once again, Joe did not pay me for the work. He kept stalling me with promises, and even though I really needed the money, I believed my friend. Two years later, I found out that he had been paid in full for both jobs and had not paid any of his subcontractors, and he has filed for bankruptcy. I may be out the money.

There are certain professions, in the medical and legal professions especially, who may be bound to continue working even if have not been paid, but in most cases, you can easily withhold your product or service. If you are in doubt, ask your attorney.

DO let the collection agency be the point of contact

Some customers who have avoided you for ages will suddenly want to speak with you and work something out. Let the collection agency do the work you hired them to do. Some customers will call you to complain about the agency.Listen and discuss with your agency, but also realize that this tactic may simply be that – a tactic to take the attention away from the debt owed to you. If customers in collections want to work out a payment plan, let the agency handle it for you because they will document it and follow up to make sure the promises to pay are kept. Once again, a note from one of our client files: