Chasing old debts doesn’t just cause short term problems. Recouping these funds takes time that could be better spent finding new clients or working towards business development. The more time that is spent trying to regain money from past projects, the worse the impact on both current and future cash flow. One of the risks of doing business where the client pays after services have already been provided is that the client may reap the benefits of your service without paying for the privilege. This can be especially problematic for small businesses that can’t afford any profit cuts.
What Other Options Do I Have?
The most popular option for businesses is to outsource their debt recovery and allow a collection agency to take care of any unpaid services. This frees up the business to pursue other interests, while their losses are being dealt with. Debt collection agencies also have more tools at their disposal than most businesses, which means they are more likely to find debtors and set up appropriate payment methods.
What Kind of Training Do Debt Collectors Have?
One of the biggest advantages to outsourcing debt recovery is that collection agencies have the training necessary to recoup a larger amount of losses. They are trained specifically to avoid confrontation, which helps maintain a positive relationship, as well as a higher percent of debt recovery. Even more importantly, however, they are trained in assessing a particular client’s ability to pay.
Without being able to understand a client’s financial status, it’s almost impossible to recover a debt fully. If the client is asked to pay too much, they may lapse in payments, leading to the debt remaining unpaid. On the opposite end of the spectrum, if a client pays a smaller amount than they can truly afford, it will take far longer for the debt to be repaid than necessary. The faster a debt is paid, the more your business is able to focus on moving forward with other clients.
What If The Client Can’t Be Found?
One of the biggest problems businesses face when recovering debt is when a client moves or changes their phone number in order to avoid their debt. A major benefit of outsourcing your debt recovery is that a debt recovery agency have systems set in place that allow them to find the majority of debtors, regardless of contact detail changes.
While your business may be able to access some of the databases that debt collectors use in finding lapsed clients, without training this process can be lengthy and complicated. For example, debt collection agencies often use tracing programmes, cross-reference addresses, and have access to court judgements. They can also use your data to better understand and locate the client.
Are There Options Besides a Collection Agency?
If a collection agency isn’t the right option for your company, there is another option for outsourcing your debt recovery. Credit management, which is more akin to an accounting assistance package, helps to maintain a good relationship with clients, regardless of their current ability to pay. Like collection agencies, a credit management service allows you to spend more time focussing on your business, rather than chasing debts which hinder your profit.
There’s another bonus to outsourcing your debt recovery: reducing your stress. Choosing a debt recovery agency allows you to feel assured that your money is not lost, without requiring that you take your mind off your business. No matter which option you choose, outsourcing your debt recovery is the first step towards controlling your profits and growing as a business.
Scott Bryan is a financial blogger who enjoys explaining the world of finance in everyday terms. A high street bank manager for over thirty years, he knows that everyone has unique requirements and so is dedicated to helping you find the right solution for you. He now works as a freelance financial writer when not consulting.