Is Your Business Collecting IOU’s And More Debt?
One of the biggest challenges that a small business faces is staying up to speed on collections. You can have the greatest SEO program in place, a stellar social media campaign and the best sales team around, still you are finding your business in a hole. If a large number of clients owe you money, you can quickly end up being in the red when checking your financial books.
As the U.S. economy continues its up and down ride, it is important as a small business owner that you stay on top of your collection efforts in order to make sure anyone doing business with you, be it a consumer or another business, is paying you in a reasonable amount of time. Otherwise, you face the prospect of missed payments and having to find an alternative source in order to meet your bills.
- To start with, make sure you have a person or team in place to handle collections. In a number of small businesses, this important task oftentimes goes unchecked because everyone is wearing several hats, meaning collections is not getting the necessary time it requires.
- Secondly, make it clear to your customers that you have a set of rules in place when it comes to making payments on time for the products and/or services they acquire from you.
- Lastly, if the task of getting payments from customers is becoming too burdensome for you and your business, consider hiring a collection agency.
Managing your time
If you decide that you and/or your team need to handle the collections, then be cognizant of the fact that it will take more time away from your other tasks. Ask yourself if you really have the time to be placing phone calls and sending out notices, or would you be better served letting a professional agency handle such matters?
A collections agency
In the event you feel like your small business is better served working with a collections agency, do not just hire the first one you come across in an online search or in the Yellow Pages.
Let’s face it, some collections agencies are on the up and up, while others are looking to find that small business owner that is too busy with other responsibilities, meaning you may not give them your full attention. In that case, you could end up further in debt when the collection agency itself wants its money.
If you decide that a collection agency is the route to go in order to get your money, it is best to remember the following:
- Find a collection agency that has experience working with a business your size. Agencies work with all different kinds and sizes of businesses on a regular basis, but make sure they have the time and resources to work with your needs;
- Obtain references for the collection agency you are thinking about going with. Whether it is through other businesses, online reviews, your accountant and/or attorney or your own investigation, make sure you find a credible agency with which to work with. If there are any red flags such as complaints or financial issues, look for someone else. It is important that the agency you are considering adheres to the Fair Debt Collection Practices Act. What you want to avoid is locating and going with an agency that is harassing customers and ringing up complaints;
- The collection agency you end up choosing should also show proof that it has errors and omissions insurance. That line of coverage will protect your business and the collection agency in the event the debtor chooses to sue. It should also be licensed in all 50 states so that you do not have problems if you are headquartered in California and you are going after someone in Maine for a payment. If a collection agency is not licensed in all 50 states, it is possible it will not be able to undertake skip tracing, which tracks a debtor using databases if the debtor moves away without leaving their address or phone number;
- Lastly, make sure the agency you select can provide you with past examples of successfully collecting from both consumers and other businesses. Results are what matter at the end of the day, so do not take on an agency that has no proven track record to speak of and is only interested in serving its own financial needs. Remember, collection agencies work on a commission basis, retaining a portion of what they collect.
Related: Advice For Chasing Debtors
At the end of the day, getting your money is what matters. How you go about collecting it is up to you.