Three Signs That a Debt Collection Agency Is a Good Match for Your Small Business
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As a small business owner, you've poured your heart and soul into your enterprise. While over 50% of small businesses fail in the first year, yours has continued to thrive. But with steady fixed and variable costs, you can't afford to have an undesirable accounts receivable turnover ratio.
Here, you may consider partnering with a debt collection agency. With thousands of agencies to choose from, it's important to partner with the right one. Here are a few signs that a debt collection agency is a good match for your small business:
#1 They Are Diplomatic
You've worked hard to develop valuable relationships in the business community. Such relationships are crucial to the wellbeing of your company. Damaging these relationships could put your reputation and your ability to conduct business with other partners at risk.
When an invoice is long overdue, you may consider sending polite reminders through phone calls, emails, or letters. You may also consider offering payment plans. With more stubborn customers you may consider more aggressive methods, especially when you're under financial pressure, but this could be disastrous.
You know that debt grows harder to recover with time. You also know that customers don't respond well to aggression. Here, it's crucial to partner with a debt collection agency that finds the right balance.
Avoid the minority of agencies that use underhanded tactics like harassment and threats. Remember, small businesses need debt collection services they can trust to recover revenue in diplomatically. Find an agency that prides itself on its ethical debt collection methods. Here are a few ways an ethical debt collection agency gets the job done:
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Instead of shady tactics, they'll use a campaign of official demand letters and phone calls. Customers usually pay when a reputable agency is involved.
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When directly communicating with a customer, they'll use a diplomatic tone and skilled negotiation to recover a debt.
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They will have the ability to report a debtor to the three major credit bureaus. Most customers and businesses clear their dues when they realize that their credit rating could be affected.
#2 They Don't Demand Payment Upfront
As a small business, you can't justify the expense of having an in-house collection department. Likewise, you can't afford to partner with a debt collection agency that demands a large payment upfront or a mandatory minimum number of accounts. Such agencies usually prioritize the easiest accounts and ignore the harder-to-recover debts. With time, such accounts become impossible to recover.
Instead, find a debt collection agency that works with you on a contingency basis. An agency that only gets paid after a successful recovery is more likely to work with you honestly.
#3 They Understand Your Industry
Find a debt collection agency that's experienced at working with small businesses and is familiar with your industry. This will improve their chances of successfully recovering your revenue. For example, an experienced debt collection agency will understand that recovering medical debt requires different tactics than recovering overdue luxury car payments.
These are three signs that a debt collection agency is a good match for your small business. With the right debt collector on your side, you can improve your cash flow and have the resources to develop your business.
