Whether you’re running a small business or a large company, there will always be moments when you’ll encounter overdue accounts. In times like these, how you choose to deal with those accounts can make or break your business. Letting a debt go unpaid for too long can negatively affect your cash flow, erode your profits, and hinder business growth.
If your business finds it difficult to successful collect debts, then it’s best that you delegate that job to a professional debt collection firm. Although it might initially seem counterintuitive to pay for a third-party firm to collect your debts, doing so actually offers many great benefits for your company.
In fact, hiring a commercial debt collection agency can actually help strengthen your business. Here’s how:
Reduce Stress and Aggravation
Debt collection agencies have one primary mission—to recover money owed to businesses like yours. With their assistance, you won’t have to worry about spending your time and resources chasing after difficult clients. This can significantly reduce your stress and give you more energy to focus on other crucial aspects of your business.
Faster, More Successful Debt Recovery
Professional debt collectors bring a level of expertise to the debt recovery process. Due to their training and experience, they are able to analyse your accounts properly and determine which collection strategy will work best with your particular situation. Also, collection agencies have access to certain resources that can make the debt recovery process faster. These include credit reporting tools and public records databases.
Moreover, hiring a debt collection agency adds a sense of urgency to your collection efforts. It shows debtors that you are serious about recovering the money owed to you. As a result, clients often become much more motivated to pay their overdue accounts.
Improve Company Cash Flow
As a direct result of faster and more successful debt recovery, your company will be able to maintain a positive cash flow for a longer period. This means you can pay your suppliers and employees on time, thus maintain a good credit rating.
Plus, consistent positive cash flow will allow you more freedom and flexibility to explore opportunities for business growth. Also, you will have ample resources to invest in training your staff and improving the products/services you offer.
There are various laws and regulations that govern the debt collection industry, and these can differ depending on the industry and state or country you are in. If you are not well-versed in these laws, collecting debts would quickly become a minefield of potential legal issues. But if you work with a professional collection agency, you can avoid this problem entirely.
Expert debt collectors know and understand the complexities of insolvency law as well as consumer rights. They use this proficiency to successfully recover debts on your behalf without exposing your business to legal risks.
Debt collection companies keep detailed records of any and all communication with debtors. This will come in handy in case you decide to take legal action against a debtor in the future. The detailed documentation will show the court that you were not negligent and that you took all the necessary steps to contact the client and recover the debt.
These records will also prove to be useful in claiming bad debts as tax deductions because they will prove that you exhausted all possible options to collect the debt.
Maintain Business Relationships
The stress and general discomfort that comes with debt collection can often ruin the relationship you have with existing clients. This is especially the case if said customers are unable to settle their overdue accounts right away. They would avoid you while you chase after them, frustrated that your efforts are not yielding the results you want.
By outsourcing this job to a third-party collection agency, you can avoid these complications and still maintain a professional relationship with your clients. This will be very useful if you wish to continue doing business with the customer after their debt is settled.
Practical Credit Management Advice
Although the main focus of a collection agency is to recover debts, their services don’t stop there. They can provide practical debt advice and help you improve your company’s credit management system. They can also conduct risk assessments to determine the potential areas of weakness in your business.
In addition, they can help update your Terms & Conditions document so your business will have ample legal and financial protection in case of lawsuits.
As shown in the points above, hiring a third-party collection firm can be an extremely beneficial move for your business. When choosing a collections agency, be sure to check their experience and credentials. It’s best to select a firm that has worked extensively in your particular industry. This way, you can be sure that they fully understand the intricacies of your field and tailor their services accordingly.