7 key reasons why you should partner with a debt recovery agency
More than 60 per cent of small businesses in Australia close down within the first three years of operating. Although this may not come as a surprise too many due to the never-ending challenges that business owners face on a day-to-day basis, in this article we’ll take a look at the most common issue of ‘cash flow’ as to why many small businesses close their doors every day.
Whilst there are various reasons why businesses are impacted by cash flow, the most concerning part is it is often areas of the business that can ultimately be controlled and managed that leads to business closure. SMEs need not only need cash flow to survive, but to grow and prosper also. Without a solid cash flow position, you’re not only unable to keep your business operating, but also impacts your ability to fulfill your obligations as a business owner like paying employees and suppliers.
No matter the size of your business, one key function that is paramount is invoicing and credit control. With the state of late payments in Australia at an all-time high according to Illion’s latest quarterly report, small businesses need to make sure they have appropriate processes and procedures in place to help limit slow payers and bad debt to facilitate a healthy cash flow position – as this essentially dictates the longevity of your operations.
Whether you have a dedicated accounts department or simply employ someone to manage your bookkeeping and invoicing, there’s a particular function that many businesses overlook that could have potentially saved them from closing down their operations – and that is partnering with a professional debt collection agency to assist with their accounts receivable management and slow payers.
Many view partnering with a debt collection company as a last resort to help with slow payers or recovering bad debts, however by using a reputable collection firm as an extension to your existing team, will ultimately remove any nasty surprises and make sure your cash flow is always healthy – allowing you to focus on growing your business and not worrying about chasing payments from customers.
With many businesses continuing to realise the benefits of outsourcing certain components of their account receivable functions to a debt collection agency, we have outlined 7 key reasons why this could be the best business investment move you make this year.
1. Time is precious, so use it wisely.
Collecting money is the core focus and specialism of their business. They spend their time chasing your debts to achieve a common objective – to get you paid as fast as possible. As a business owner, you want to focus operating your business – especially in areas that drive growth, not by expending time and effort chasing payments. A collection company is often engaged to chase the debt and arrive at a beneficial conclusion, whilst dealing with all the necessary administration on your behalf throughout the whole process.
A professional collection company are experts in their field, whilst they also have access to industry leading technology that you wouldn’t have access to to get you paid quickly.
Debt collectors need to be sound negotiators, tactful, persistent and even have an understanding of human psychology. More importantly, collection specialists have the most up-to-date knowledge of debt collection legislation, jurisdictions and procedures, so they know and deploy proven recovery methods to make your debt a priority and collect the money from your customer.
The arrival of an official debt notification from a collection agency has more impact than a phone call or email from you or your accounts team. There is a psychological element to getting a third-party involved, as it means you take you accounts receivable seriously. Furthermore, the debtor knows that they know they cannot ignore a courteous demand for payment indefinitely, because they know full well that the collection agency will have a set of procedures to follow up until the debt is settled.
You may hesitate at the idea of the additional cost of using a debt recovery agency, however in most cases its actually a more economical option depending on the amount owed to you. It can be quite expensive to set up your own internal collection system, so depending on the size of your business this most likely won’t be an option.
Even considering if your credit controller works diligently to recovery money owed, there will still be times when a debtor simply doesn’t pay. If or when this occurs, you’ll need to initiate further collection proceedings at some point, so by having a dedicated partner already established within your business you’ll be able to not only mitigate these issues arising in the first place, but have someone on hand already to deal with it promptly before it gets out of control.
4. Maintain strong brand reputation
You might assume that involving a third-party to collect your overdue could alienate your customer, but it can often work in your favour. A recovery agency can sensitively deal with the issue of non-payment, enabling your customer to save face if there was a genuine reason for non-payment and allowing them to continue doing business with you after the debt is reconciled.
5. Serious payment terms and processes
When you use a debt recovery agency, it sends a clear message to those you do business with that you take account receivable seriously. It shows that you expect customers to abide by the trade terms set up between the two parties and expectations that you will do the same in return.
6. Builds stronger business relationships
Keeping credit control at arm’s length enables you and your employees to maintain strong relationships with your customers. A reputable recovery agency will work in such a way as to retain goodwill between your business and its customers.
7. Simply more efficient and more effective
All the reasons to use a debt recovery agency mentioned above come together to produce a quicker resolution. You or your employees aren’t hired to constantly chase money owed to the business, instead they should be focusing on what they were employed to do.
A faster resolution also means stronger cash flow, so there is significant benefits over trying to do this yourself and that is why many businesses today are engaging the services of a professional debt collection company to be an extension of their business to reduce bad debt.
Remember, as a business owner, you might be tempted to give up on debts that remain unpaid after a period of time and write-off the debt, however partnering with a debt recovery agency can help mitigate the need to do this and collect the money owed to you faster – delivering a much healthy balance sheet and profitability.
About Marshall Freeman
Marshall Freeman is Australia’s leading debt collectors and recovery specialists. We have been servicing over 20,000 businesses throughout Australia for over 15 years, which has set the foundation of deploying industry leading knowledge and collection techniques that simply delivers results that are unrivaled. Whether you need assistance with slow payers or collection of bad debt, we offer a transparent and stress free collection process that makes your debt a priority to get you paid faster.
If you’re looking to partner with a result driven debt collection agency, please feel free to call us on 1300 136 271 or get an obligation FREE debt appraisal by filling in the form on this page.