When should you hire a debt collection agency?
For many small businesses these days, it is smart practice to have a debt collection partner in place well before ageing debts accumulate and threaten the viability of the business operations. And you can engage a debt collection agency to streamline your entire billing cycle, not just handle your old debts owed to you.
Rather than seeing debt collection as a reactive process to recover payments, it’s increasingly being seen as an ordinary part of the entire accounts receivable process. The benefits of activating debt collection systems early on cannot be understated, given the importance of healthy cash flow to the survival of small businesses.
Small business owners often wonder at which stage they ought to be calling in the professionals when it comes to chasing accounts. They often ask themselves, just how old does a trade or commercial debt need to be before it should be sent to a collection agency? Traditionally, outstanding debts are sent to a debt collection agency when they fall 90 to 120 days past due. But this is a very long time for your small business to miss out on crucial cash flow.
Generally, it’s better to start collection activity no later than 2.5 times the length of time of your standard terms of trade, or preferably sooner. Taking prompt action on overdue accounts means it will be much more likely to be collected, and will prevent your client slipping further into the red as goods or services continue to be accessed before old accounts are paid off.
Having a responsive and proactive collection agency as a partner early on will eliminate any doubts about the timing of taking action when chasing overdue debts, and will speed up your debt collection process by allowing the agency to take charge from the moment your client’s debts become overdue.
If a customer fails to engage with your agreed terms of trade, it becomes an easy decision to delegate your accounts to your debt collection agency. There’s really no need to go through the pain of trying to collect from a slow payer yourself or even just attempting to make contact with an evasive customer.
Having an independent debt collection partner is usually simpler and less time-consuming than enlisting your own staff to chase accounts receivables, too. It’s a straightforward process to lodge debts with a debt collection agency. It can be done easily and quickly—completely online in many cases. Multiple debts can be lodged at once, further streamlining admin processes.
Apart from staying on top of invoice reminders, your debt collection agency can issue letters of demand immediately on receipt of account information, and you can then track the debt recovery online for updates on the progress of your debt collection. A legal letter of demand is usually enough to motivate a client into action. While it’s possible to threaten legal action yourself, many slow payers will continue to ignore such correspondence unless they see a letter of demand on debt collection agency’s letterhead.
Is your debtor not responding to your reminders and avoiding your phone calls? Avoid all the unpleasantness of chasing debtors by engaging a specialist debt recovery team to ensure a smooth, professional and successful debt collection process. Don’t put up with endless broken promises or bouncing cheques: act swiftly to instruct your agency to send outstanding accounts for collection.
If you’re unsure about whether to use a debt collection agency, please give one of our friendly team a call today on 1800 729 231 or simply fill out our form and we will answer any questions you have about the debt recovery process.