Bad debt recovery may be a chore, but it is not rocket science. A little focus and a consistent plan will work wonders.

Once you have exhausted your in-house collection efforts, you may wish to hire a collection agency for the customers who have ignored your efforts. Before you send any file to your collection agency, try one last thing. Offer a discount.

Now I can hear you saying, that’s the tip? Yes, that is it. No magic pill. Just offer a discount.

Why is this such an important tip? Well, because many small business owners either do not offer a discount before sending a file for collection, or they offer a discount that is too open ended.

Consider the fact that your collection agency will likely charge you 25-35% contingency debt collection fees (that is, a percentage of sums they recover). If you offer a discount of say, 10-15%, and the customer pays you, you do not have to send the file to a collection agency and you have effectively reduced the cost of collection.

Two friends (who are also small business owners) followed this advice and both got paid. 

To make this offer more effective:

• Send demand as a collection letter via certified mail or email with return receipt so that you will know your customer received it. 
• Make certain to qualify the discount as a limited time offer only. Give specific deadline for payment of reduced price and advise that discount will expire and full price will apply if not paid by deadline.
• Advise customer that the offer is their last best chance to avoid further collection activity.
• Be ready to send the account to your collection agency if the customer does not pay you. It is important that you do not delay if you get to this point.

Once again, make certain your documentation is well documented. 

Will this approach work for you? We would love to hear from you.

Want a collection letter that gets results? We can help.