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Does Your Contracting Business Need a Collection Agency?

Contractor Collection Agency
When you are operating a contracting business, some clients will occasionally refuse to pay their outstanding balance. Do you really have time to become a part-time debt collector?

Despite your best efforts to recoup your money, your final option may be to hire a collection agency to recover from these delinquent customers. 

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The question is, when do you know that it’s time to make that call?

We suggest that once an account is over 60-90 days its time to hire a good collection agency with extensive experience in your industry.

All contractual businesses should have a well-defined accounts receivable strategy. Before providing service to a client, you must ensure that your contract with customers is legally binding and specifies the consequences of not paying. It should allow you also to add check bounce fees and late fees.

Each signed agreement, even communications such as emails, can hold your client responsible for paying for your service. Whether they aren’t happy with the service or they don’t have the funds to pay you, here are obvious signs you need to hire a collection agency to help you recover your money.

1. Your Client Is Stalling

Clients who want to appear as if they have intentions to pay off their debt will use stalling tactics. These clients will repeatedly miss payment deadlines, write bad checks, or continuously dodge your phone calls and all sorts of excuses. Once this starts happening every week, hiring a collection agency should be your next step.

Some people may go as far as to make a formal complaint against your business. Whether this is done on a more low-level service such as Yelp or Google reviews, or they file a formal complaint against the Better Business Bureau (BBB), even though you know that your work was executed just fine. Clearly your client has decided to take an unprofessional route and at this point, it’s obvious they aren’t trying to pay you.

2. You Can’t Locate Your Client

Initially, your client may make empty promises to pay their outstanding balance. They may do this by actively answering your phone calls. But once it’s evident that these tactics won’t deter your hunt from recovering their past due accounts, they may disappear altogether.

If your client blocks your phone number, changes their email, or seemingly vanishes from social media, it’s time to hire a collection agency. An agency will have the resources needed to track down your delinquent clients so you aren’t wasting more time.

3. You Don’t Have Time and Expertise To Recover Past Due Accounts

The amount of time and energy it takes to persuade people to pay you is exhausting. It will take you emailing, calling, and sending formal letters on a routine basis. If you have a staff that manages these types of calls, that is daily manpower and employee pay that you must manage to recover past due accounts.  And once a client has decided to block you from all forms of communication, it can be hard to track them down.

A collection agency (especially the more reputable ones) has the proper tools to track people, send collection letters, make collection calls, and even take them to court if needed. They will take that time off your hands, and you can rest assured that someone is acting on your behalf to pay off your contract. Remember that most agencies will take a portion of the debt owed for their services, but this is usually worth it in exchange for their rigorous efforts.

RELATED: Small Business Collection Agency: Debt Recovery

4. You Have Pending Bills For Your Own Contracting Business

When someone neglects to pay their balances, it puts a financial burden on your business and restricts your own cash flow. If you have your own outstanding payments that need to be paid on time, you may want to hire a collection agency as soon as possible. Even if you are not reliant on your customers paying on time, you never know when you might need the extra cash.

Instead of putting yourself at the mercy of your clients, an expert collection agency will be your best shot to get those payments started. Being sent to a collection agency will take a toll on your client’s credit, making them more inclined to start making payments.

5. You Can’t Afford Legal Representation or Don’t Have Time

Some contracting businesses instantly put out the threat of legal action once a client refuses or dodges their bill. While this route also works to recover past-due accounts, paying an attorney takes time and upfront costs. Instead of going this route, you can indulge in the help of a debt collector.

Some agencies work on a contingency basis, while others require a flat fee. You may want to consider using an agency over a lawyer if you don’t have a tangible contract with your client or if your client has moved. Agencies may have access to other databases that allow them to trace where your client relocated to (known as skip tracing). Do your research to see which option is the more viable and affordable for your contracting business.

So if you are a Small business owner,  Electrician, Plumber, Heating and Ductwork, Drywaller, Painter, Finish Carpenter, Tree Cutter, Mason, Roofer, Excavator, Landscaper, Cabinet maker, Fabricator, Architect and Interior design consultant; contact us to recover your unpaid bills.

RELATED ARTICLE: Will a Collection Agency Ruin My Business Relationship? 

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