Try as you might – through credit checks, references, and other methods both pre-and post-sale – you will eventually have clients who are behind in their payments and don’t make any effort to pay their bills. That’s when collections becomes an important part of keeping your business afloat.
As a small business it is unlikely that you have a department dedicated to collecting on past due accounts. Instead of wasting precious staff time with questionable results you can hire professional collectors to track down your debt.
Collecting on unpaid balances is often difficult, and collectors must follow strict rules and regulations. Hiring a professional firm with small business experience can improve your results and make sure you stay within the law.
Collecting for a Business: How It Works
When you turn over your bad accounts to a debt recovery agency they will immediately begin contacting your debtors. They will then encourage these people to pay the money they owe to your business. Sounds obvious – but it works.
Simple repeated contact works well for small amounts. The fact that you’ve reported them to an agency can reinforce the fact that you’re serious about recovering the money you’re owed.
If a debt settlement company is faced with a large account – either money owed by a large business, or simply a large amount of cash – it may not prove efficient to contact someone by phone alone for payment. It is difficult to discuss payments with someone who has the authority to make decisions in large organizations and you will want a definite record of all contacts. For these accounts the agency will send letters asking for payment in addition to making phone calls to the debtor.
Is It Time to Collect?
How can you know when to turn bad debt over to a business collection agency? As soon as you determine that a client is unlikely to make good on what they owe, send the account to the agency. 
Accounts can be sent to collection companies in as little as thirty days after the payment was due. On the other end of the spectrum, you can wait a year or more to collect the money, but that just means you go longer without it, and the overall chances of recovering the debt are drastically lower.
There are several clues you can use to determine if it is time to send an account to the agency.
- When you contact a debtor, they make excuses or complaints in order to avoid paying
- When you contact them, he or she refuses to admit they owe money
- You are unable to get the client to respond to repeated phone calls or letters
- You are unable to find a debtor – they have changed addresses and contact numbers without letting you know
It’s important to choose an agency that is both skilled and restrained. They will be representing you and your business. As your representative, they must be polite and respectful throughout the entire process.
The agency you hire must be licensed in the state where they will be contacting debtors, and they should have Errors and Omissions Liability insurance. Once you decide on an agency, you can confidently put outstanding accounts in their hands and expect a high percentage of repayment.
Small Business Collections Prices
Pricing details: My company was looking for quotes from multiple debt recovery agencies. We agreed to work with one that would only get paid if they collect our outstanding balances. They would receive 20% of what was recovered.
– Consulting Firm, Seattle, WA
Pricing details: We talked with a company and we were able to agree on paying them 20% of the fee that was collected and 35% if it was litigated.
– Advertising/Marketing/PR, Easton, CT
Pricing details: We went with a provider that would recover our balances fully and then charge the customer the fees for collecting.
– Health Care Industry, Renton, WA
Pricing details: We spoke with a few different collection agencies and we decided to go with one that only took 15% of what was collected. If they were not able to collect the funds then we didn’t have to pay anything.
– Advertising/Marketing/PR, Cuyahoga Falls, OH
Pricing details: We went with a collection company that only charged us a percentage of the collected funds. The percentage was determined by how old the debt was.
– Business Services, Georgetown, TX
Pricing details: I agreed to work to pay a business collections agency $120 to do 4 accounts for us for the year.
– Construction/General Contracting, Canoga Park, CA
Pricing details: Our company ended up selecting a company that will keep 25% of the amount collected for accounts that have been overdue for less than a year. They would take 50% if the account has been past due for over a year.
– Health Care Industry, Englewood, CO
What other people are looking for
We are a bakery and one of our clients has not been paying his bill. He will no longer return our calls and is now puchasing from a grocery store. We need the help of a small business debt recovery agency to help us collect this debt.
– Restaurant, Chicago, IL
We are looking for a service to collect about 4-5 invoices we have outstanding. We are not getting responses to any phone calls or emails.
– Business Services Company, Orange Park, FL
My company needs help from a business collection agency to help us collect $10,000 from a Florida corporation.
– Financial Services, Toledo, OH
A company in Houston owes us money for professional services that we provided for them. All efforts to collect this money have failed. We need an agency to help us receive our payment.
– Business Services Company, New Orleans, LA
We need help collecting $30,000 from a local customer who is consistently slow to pay us.
– Manufacturing Industry, Santa Ana, CA
I am a consultant and I need help collecting $37,000 from a Software Consulting Company in NJ that is not paying their last 3 invoices.
– Computers – Software Company, Jersey City, NJ
My company is searching for a company to help us collect on several outstanding invoices that we have from one of our customers.
– Consulting Agency, Matawan, NJ