Posts Tagged ‘Bad Debt’

The #1 Reason Businesses Do Not Collect Their Bad Debt

April 5th, 2021

Why not place your file for collection? What do you have to lose? Are you afraid of losing your customer? The number one reason businesses do not collect their accounts receivables that are past due, is because they do not even try to collect the account. There is that old adage, “You miss 100% of the shots you do not take.” This is just as true with debt collections and you increase your chances of collecting even more when you use a professional collection agency.

One of the most difficult things to do is to place a file for collection when you have an established relationship with that account. Are you afraid of losing this customer or alienating them? This is a legitimate concern and is even more worrisome when you do not have a prior relationship with a collection agency. There are many debt collection agencies that can and will ruin your relationship with a customer just to try and collect an account. How do you collect your accounts and keep the customer?

Most owners are afraid to place a file for collection. It’s an unfortunate circumstance that you will find yourself in because you are literally in a Catch-22. You are afraid of losing this customer because you fear going out of business. On the other side of the coin you will go out of business if you do not collect your bad accounts! These are some of the challenges faced by small and large businesses alike.

Here’s the truth about your accounts receivables. Most of your customers can afford to pay you, but it is in their interests to delay the payment as long as is possible. They can use you and the money you have credited them as an interest free loan. This is especially true in an economy like the one we are in where banks are not extending credit. The point is that most businesses have a choice on what to pay. Picture the situation as a balancing act. A well run business will be able to balance all of their business debts like spinning plates. They may be paying another account that is more pressing or has been more vocal. Remember the squeaky wheel always gets the grease. Whatever the case, don’t be fooled that the company or person that you are calling does not have the money to pay their past due accounts. They do have the money, but they are just paying someone else.

So the question then becomes how do you get your bad account to become your customer’s priority? Third-party intervention is just the beginning and it is often times the most difficult step to take. How can you be sure that you are using the right collection agency and not one that will scare your client off from ever doing business with you?

How much is your time worth? What could you be doing that is more profitable than trying to collect your bad accounts? Are you an expert in collecting to begin with? Does your company have a reputation for being an easy mark for not paying? Let a professional accounts receivable management firm handle your outstanding claims before your good customers force you out of business. Build a strong relationship with a professional collection agency before it is too late for your business.