Top 6 Reasons for using Debt Recovery Agencies
The longer a debt remains unpaid the more detrimental it will be for your business
. If a business is riddled with continuing bad debt, cash flow is adversely affected. A negative cash flow impacts your ability to pay debtors and/or re-invest in your business. If you are unable to honour your debts, this will upset the credit rating you hold with your suppliers.
Debt recovery agencies can be invaluable when it comes to chasing large debts and those that have exceeded 90 days, or even for those regular monthly accounts. Remember, the earlier you refer the debt, the greater the likelihood of recovery.
If members of your staff are already overloaded with work, hiring an agency to handle your accounts receivables is an efficient way of improving your cash flow without having the added expense of a new employee. Some of the other reasons why you might look to using a debt recovery agency to look after your debts are detailed below.
1. When the initial request has been met with no response
Offering credit to customers shows your goodwill so it is frustrating when payments for invoices aren't received promptly. Rather than chase the debt yourself an agency can save you and your staff the effort required to improve the overall state of your debtors' accounts. Plus, most agencies work on a contingency basis. Therefore, you will not be out of pocket unless they collect.
2. Follow up invoices and reminder notices are being ignored
If you have sent out follow up invoices with reminder notices but it appears these too are being ignored, you are now left with fewer options to recover the debt yourself. The alternative to spending valuable time and resources on phone calls and follow up letters is to hire a collections agency. This allows you to focus on core business.
3. Aged receivables are greater than 90 days
There has always been great debate on whether aged receivables should ever be left till 90 days. Common practice and research in more recent years has shown that a business is less likely to operate efficiently unless the turnaround for credit accounts is within 30 days. If the account has reached the 90 day period it is far less likely you will retrieve the money without assistance from an agency.
4. Letters of demand come back unopened
What are your options when your letter of demand comes back unopened with a return to sender'? If the customer has genuinely moved it may be easy enough to telephone and ask for the new address. But if the phone has been disconnected, a
debt collection agency needs to be contacted to take care of the matter for you. Some collection agencies offer skip tracing services to locate the whereabouts of debtors who have skipped.'
5. Unable to contact the customer by telephone
When the customer can't be contacted by phone and letters have come back unopened there is little recourse but to seek help from the professionals. It always helps to refer the debt for collection as early as possible. This ensures the contact details are more current and gives you the greatest chance of recovery.
6. Agency does the hard work for you including searches
Paying an agency to collect debt on your behalf means they will be doing all the hard work for you. They have access to searches and collection tools not generally available to the public. Further, all the work is usually done on a no collection, no fee' basis.
If you have tried all the standard methods of calling in an outstanding debt without success, it may be time to consider handing the matter over to a debt collection agency.
Top 6 Reasons for using Debt Recovery Agencies
By: John Zukerman
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