The collections process is one of the most difficult parts of any business, but small businesses are particularly affected by it. Many small business owners understand that they need the money. Yet, trying to collect on it may seem like an impossible task. Here’s how you can take the stress out of collections.
Don’t Wait to Start the Collections Process
There’s no need to wait until an account is 90 days or more past due to begin collections. Start the collections process the day after an account is due. Your collection efforts don’t have to be overly aggressive when you start early. You’re calling to remind the client about the invoice. It could be that they didn’t receive the invoice on time for some reason. It could be that they had questions about the invoice. Calling early helps you get paid because you’re able to answer questions and solve problems.
Also, an older a debt is, the harder it will be for you to collect on it. Once an account is 30 or 60 days past due, you should consider getting professional debt collections help. Clients ARM offers both first and third-party debt collections for businesses of any size. First-party collections can be beneficial to help protect the reputation of your business. During this process, a professional representative from Clients ARM calls the debtor and identifies themselves as a representative of your company. This helps take the sting out of the collections process. With both first and third-party collections, Clients ARM relies on old fashioned customer service principles to help you get paid.
Understand Your Options
You have options when it comes to collections. The first option is to begin by doing your own collections. This may seem cost-efficient, but you must consider the time it takes away from your clients and potential clients. The second option is to hire an employee dedicated to collections. This certainly frees up your time, but you must consider several factors. You may have to pay to train the employee or to update their training on federal and state collections laws. You’ll also pay for overhead, insurance, time off, and a salary. If you don’t have enough work to justify full time collections, you must consider whether they can and would be willing to take on other projects around the office.
You also have outsourcing options. You could outsource your collections to a collections attorney. While a collections attorney can work the process for you and even represent your best interests in court, they can be expensive. Not all of your past due accounts may be worth this added expense. The same can be said for filing a small claims lawsuit on your own.
You could partner with a collections agency. Although this costs money, many agencies get paid a contingency fee. This means that they keep a percentage of what they collect on your behalf. That’s a great feature that most small businesses can appreciate. However, you should do your research on the company you’re interested in to ensure they’re licensed (if they offer third-party collections) in the state where the debtor resides, that they’re not in trouble with the federal or state government for breaking collections laws, and that they don’t have a history of abusing debtors. That’s important because your business could get into legal trouble if the debt collection agency you contract with breaks the law.
Be Ready to Negotiate
At Clients ARM, we understand that most debtors don’t stop paying for no reason. Sometimes good people (and businesses) run into financial problems. During the collections process, you should be ready to negotiate. Would you be willing to waive certain fees? Are you willing to make a payment plan the debtor can afford? Are you willing to settle for less and close out the account? Ultimately, whether you’re willing to negotiate depends on the details of the account, but it is certainly something to consider.
Need Help with Your Collections?
Clients ARM understands the stress that the debt collection process can cause to business owners. That’s why we provide first and third-party collection options for businesses of any size. We’re licensed in multiple states and we’re in good standing with the ACA. If you have questions or if you want to see how we can help you, schedule your free consultation.