when to hire debt collection agency

When to hire a debt collection agency?

Running after unpaid invoices can be too tiring. Sometimes retrieving money from your customers may not seem such a challenging task. But trust me, in some cases, you might require professional help.

Research says that opportunity costs because of delay in payments can destabilize a company’s profit for up to 5 years. But, retrieving money from debtors may not be your cup of tea. To assess the need for professional help, you must first understand your condition. The skills of your employees may not on par with debt collection tactics. A professional debt collection agency is an expert in the collection industry and knows every situation’s minute details. It makes more comfortable for your company to get the money back without the loss of significant customers.

How do you figure out that you need a debt collection agency, and when should you take that step?

Does your business need a debt collection agency?

Figuring out whether your business needs a debt collection agency can be tough, especially when you are a small start-up. It would be best if you looked forward to hiring a debt collection agency when you feel that your losses are accumulating more, and you are not in a position to handle them any longer.

A US Bank study has proved that almost 82% of businesses fail due to the company’s cash flow issues.

fit small business

To make your job easier, here are six factors that determine whether you need a debt collection agency or not.

  1. Lack of specialized employees: You don’t have employees competent enough to handle debtors.
  2. Lack of time: This may correspond to your urgency to get the money back and lack of proper support for that.
  3. Harsh debtors: Your debtors are too loud and too harsh for your regular employees to handle.
  4. High cost: The resources, as well as the money you are spending on getting your money back, are way more than hiring an agency.
  5. Small debts from a large number of customers: The balance of your pending invoices might be low, but the amount is large, so it might be a waste of time and resources to deploy your employees out there.
  6. Lack of competency: Your Company doesn’t have enough skills or knowledge to get the money back from difficult debtors who have either disappeared or bankrupt.

Always keep in mind the above factors before you go on to hire a debt collection agency.

The Red Flags of dangerous debt situations

Below are a few red flags that enable you to understand that it’s high time to hire a debt collection agency. Ignoring these red flags may be quite harmful to your business in the long run.

a. When your customer’s cheque bounce

In such a case, debt collection agencies can analyse your customer’s credit history and save you a lot of money.

b. Unpaid bills of over 90 days.

According to data, after 90 days, you lose roughly 10% per month on overdue commercial balances.

It is rightly said that timing matters a lot. If you have a lot pending in your 90-day column, then it’s undoubtedly time that you hire a debt collection agency.

c. Not familiar with laws?

When your company isn’t a pro in legal dealings regarding collection protocols and regulations, debt accumulation becomes extremely difficult.

Debt collection agencies are well versed with all the state and corporate law regarding debt collection. So, hiring a debt collection agency can reduce risks of money loss for your company.

d. A wide customer network.

When your customers are far-off, it becomes more difficult for you and your employees to locate and handle them.

Here debt collection agencies play a vital role in locating such customers and retrieving your money back.

Apart from the above factors and red flags, several other reasons necessitate the need for a debt collection agency.

e. Get your money back smoothly.

Debt collection agencies are competent enough for handling debtors that they retrieve all your money hassle-free. They have more advanced tools to manage defaulters like skip tracing and credit history analysis. These methods can fasten the cash flow process. A right debt collection agency also takes care of the cost-effectiveness of the process.

Wayne Vidzicki, the Director of Collections and Premium Audits at Berkshire Hathaway GUARD Insurance Companies, once said that you always wish to unravel debt issues as promptly as possible. Because the longer it takes, the lower the probability gets.

A debt collection agency sorts out this problem of finances and quickly and steadily increases the cash flow.

f. Get excellent legal protection and advice.

When you face a well-informed customer, you can easily fall into legal entrapment. Handling legal matters often gets complicated.

A debt collection stays updated with all the legal proceedings and safeguards your company against severe legal webs.

Not only debt collection agencies safeguard your rights, but they also advice and counsel debtors to get out of debt. Hiring the right debt collection agency also improves the relationship between you and your customers.

g. Stay free from Documentation worries.

Documentation is a vital part of the debt collection process. A debt collection agency keeps records in great detail for your company to analyse. It also proves beneficial in case of legal deceptions.

Proper documentation keeps your debt collection details in order, which you can check and sort out later.

Conclusion

To avoid your business failing due to a lack of sufficient profit, you must pinpoint a situation where you can no longer handle debtors without professional help.

Hiring debt collection agencies might help your business recover losses that would have been otherwise difficult to retrieve.

A right debt collection agency uses their skills and knowledge to protect your company from harsh and rude debtors who are in no mood to pay your debts. They also look after all your legal matters regarding debt collection. With proper documentation of records, debt collection agencies offer you the liberty to smoothly run your company without the fear of losing money via inefficient payments.

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