Businesses can have troubled relationships, much like people. When a contract is breached, inadvertently or on purpose, one of the greatest losses is trust. The process of building a business relationship consists of an investment of time and money but also of the risk of losing a portion of one’s market share, and thus, a risk of losing business. Any partnership carries with it the potential of mutual support and growth as well as the potential for corporate theft, loss of revenue, employee poaching, and more.
An entrepreneur doesn’t start a business with a distrustful mindset. On the contrary. Many business owners are full of hope, ambition and optimism. They may anticipate some obstacles, but with preparation, perseverance and a constant eye on the money meter, they can overcome them all to continue building a successful enterprise.
Just like a social contract, a business contract has some strict terms on paper, but, in reality, on-the-ground negotiations of the terms to fit business needs, slight modifications to adapt to changes, inconsistent payment schedules, and other breaches of the contract, all make the terms of the contract less absolute than they seem. Even so, non-compliance with the written terms doesn’t mean your business is in any danger if you still get your money and can support your business. When that doesn’t happen, the payment provisions of your contract become extremely important.
Need a Collection Agency for your Business?
One of the most sensitive topics is keeping track of money. Business discussions often revolve around making and saving money, cutting costs and building upon wealth, but fewer tackle one of the embarrassing experiences of being in business: collecting money owed. A reason for that is that no one really wants to call out their business partners. Many still hope to be able to do business with them if the money issue is resolved.
However, when the stakes don’t involve just a temporary financial inconvenience or a negligible bad occurrence, but instead, go high enough where the cash flow of the business is threatened, the resources expended to cover the financial hole drain the company’s finances and staff. In that case, the impasse has to be addressed firmly and immediately.
A company’s Accounts Receivable is an essential part of operations. The people that run this department are not the money makers, but the treasurers, the ones who guard the money vault, so to speak. One of their duties is to ensure the company receives payment for their goods and services. When a customer or organization skips a payment or falls behind, Accounts Receivable springs to action.
What happens when it’s not just one customer or one business partner that hasn’t paid, but several, and Accounts Receivables can no longer keep up with demands for payment without the risk of ignoring or making mistakes in their other duties? What happens when they dread pursuing collections because it’s become their full-time job?
This is where hiring a collection company to aid in the recovery effort can make sense. Collection companies are not elegant or glamorous, and many have less than a decent reputation. The good ones respect their clients’ wishes and demonstrate a strong work and business ethic, fulfilling these essential activities. The debt collection process for businesses also depends on B2C or B2B debt.
These are some of the things a collection agency can do for you:
- Take over delinquent clients and let you concentrate on growing your business.
- Removing negative emotions and frustrations from your daily business activities.
- As a third party, they will make the collection process less personal. You and your delinquent business partner might continue to be civil or even friendly.
- Discretion and preserving one’s reputation are essential in a competitive market. A collection agency and its employees are bound by privacy laws and will not toot the horn of your precarious financial situation to anyone who listens. That will not only protect you from gossipy employees but also not aid potentially hostile takeovers.
- Your collection agency will analyze your contract(s) and see where the breaches have occurred, if there are potential penalties or incentives that might be used to motivate the debtor to pay, and even help you better understand how to protect yourself in the future.
- Collection agents are well trained in FDCPA and FCRA requirements and violations, in addition to state collection laws. Knowing the rules and regulations governing the process of debt collection is imperative but learning them properly may be time-consuming. Instead of having your employees take on that extra burden, you can outsource the debt collection process to someone who already knows them.
- Hiring a lawyer to pursue collection can become very expensive. Our focus is on recovering what you’re owed and preventing costly litigation. Minimizing costs by hiring a collection agency when you’re already strapped for cash is a much better business move.
- Your revenue recovery service will take over all the tedious aspects of collecting: sending formal demand letters and follow up emails, making phone calls, investigating the delinquent client, skip tracing, credit checks, asset verification, and more. And if you ever need to sue, the collection agency will have already gathered the evidence you need.
- Revenue recovery services are familiar with the differences between various types of business, such as LLCs and corporations. Your collection agency analyzes how and whether any stakeholders in the delinquent company can be held liable for the company’s debts. While that may be a distasteful approach, it can be used as leverage.
- Last but not least, a collection agency will have an interest in making sure you get your money back as soon as possible. While an attorney may require advance payments of legal fees and court costs, a collection agency receives a percentage of the debt owed to you. This means that the sooner they recover, the sooner they get their money.
When is the right moment to hire a collection agency to simplify your debt collection process? Normally, when the account has become past due. Your contract should have payment and non-payment provisions already included. If that’s not the case, make sure to include it in future contracts. When a client has promised payment over and over but the due date has come and gone, you have to take action. One of the worst signs is when a delinquent client denies any wrongdoing, any past due balances, and any obligation to comply with the terms of the contract.
If the number of your delinquent clients increases and you keep extending credit to your partners and feel as if there’s no end in sight, then you’ve waited too long. If anything holds you back, such as apathy, timidity, fear, etc, remember that the number one reason companies go out of business is that they run out of cash. In your case, the number one reason you may be running out of cash is that you haven’t been paid. So make that phone call now and get the help you need to stay in business.
Note: A revenue recovery service that reports bills for credit reporting must remove medical debts from the credit report of the patient once the medical bill is fully paid off.