Positive cash flow is essential to the success of any business. However, it is not always easy to keep your company finances in the black. For one thing, you will need to constantly keep track of your expenses, making sure they do not go over your actual earnings. Then, there is the perennial challenge of collecting payments from your customers.
In an ideal setting, your business would immediately receive payment for products you provide and/or services you deliver. Unfortunately, this is seldom the case in the real world. Granted, there are some clients who settle their accounts on time, but there are many who are not as reliable. Often, business owners are left with a growing pile of unpaid invoices. The problem is that the older these debts get, the harder it will be to recover them.
But between overseeing daily operations, managing staff, and taking care of other crucial day-to-day tasks, where are you going to find the time to chase after delinquent accounts?
The Solution to Your Debt Collection Woes
Fortunately, there is a solution to this nagging problem – to outsource your debt collection process to a third-party firm. Here are seven key reasons why hiring a debt collection agency would be a smart move for your business:
1. Time and Focus
Unlike the typical business owner who has to deal with several different things at any given time, debt collection agencies only have one central goal – to recover debts. This means that they are able to dedicate all of their time, energy, and resources on contacting debtors and collecting funds owed to your company. It is this undivided focus that enables them to get quick results.
By hiring a reputable debt collection firm, you can be sure that your overdue accounts will get the attention necessary for successful debt recovery.
Professional debt collection agencies understand that companies have different needs when it comes to recovering unpaid debts. This is why they offer a wide variety of debt collection programs and allow you to choose the one that suits your business model best.
Some collection firms pursue debtors for a fixed rate, while other require a commission for every amount they successfully recover. The latter option is ideal for small businesses ads it allows them to maximise their collections budget.
Moreover, if you wish to sell bad debts and write them off as tax losses, you can also find third-party collection firms that can help you with this.
3. Detailed Documentation
Debt collection agencies typically keep detailed records of any and all contact they have with debtors. These records will come in handy in case you decide to take debtors to court. With such thorough documentation, you will be able to show the court that you exerted extensive efforts to contact your client and recover the debt.
This detailed documentation will also be helpful if you decide to claim bad debts as tax deductions. You can use it to prove that you did your due diligence in trying to collect the money owed to you.
4. Varied Debt Recovery Tools & Methods
Another benefit of hiring third-party debt collectors is they have access to a wide variety of tools and strategies that help make the recovery process more efficient. For instance, when a customer severs all contact with your company—their phone is disconnected and they left no forwarding address—debt collection firms can help you track down that client using skip tracing.
In addition, collection agencies have access to public records databases, credit reporting devices, and other such resources that can help you find a client. This way, you can obtain updated contact details and move closer to a resolution on the outstanding account.
5. Added Sense of Urgency
Most people have an idea of debt collection firms in their head. Although this reputation may sometimes be on the negative side, it can also come with an advantage. People tend to sit up straighter when they receive phone calls and letters from professional debt collectors.
It’s like a powerful wake-up call to clients, showing them that you are indeed serious about your intention to recover the money owed to your business. It tells debtors that you are not just about to forget or write off the unpaid invoice. This added sense of urgency that debt collection firms provide, motivates people to act more quickly in settling their overdue accounts.
6. Legal Protection
These days, there are a wide variety of laws and regulations that govern how commercial debts should be pursued and collected. Dependable and reputable debt recovery agencies are well-versed in these laws. They train their team to provide professional debt collection services that adhere to these regulations. Plus, they ensure that their staff follow high ethical standards at all times.
The last thing that your business needs is to make a wrong move and unwittingly cause a legal problem when pursuing debts. Such a mistake can quickly spiral and put your livelihood at risk. By working with the right collection agency, you can give your business ample legal protection without draining your finances.
7. Professional Advice
Since debt recovery firms specialise in credit management, they can offer valuable tips and expert advice that can help strengthen your company’s financial position. They can provide everything from practical tips on how to get your business out of debt to effective strategies to increase cash flow. They can also point you towards tools and other resources that can assist you in screening prospective clients so you can easily spot potential slow payers.
Letting a dependable and experienced collection agency manage your outstanding accounts offers a myriad of benefits. Your collection efforts will be more effective and efficient, you can minimise legal risks, and you will have access to valuable professional advice when it comes to credit management.
But perhaps the most important advantage of outsourcing debt collection is that it frees up your time and resources so that you can focus more on core business activities. Instead of chasing after debtors, you can concentrate your efforts solely on day-to-day operations. This way, you can achieve more goals and move your company towards profitable growth.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."