No matter what type of business an organization is and what it does, the most important part of the business is getting paid for the work done.
For small businesses, this is even more important. Small businesses usually operate on razor-thin margins and depend on their cash flow in order not just to grow but to survive. A bill that has not been paid within 2-3 months despite multiple reminders will likely go unpaid without professional help. There is a 90% chance that you will see a complete loss on these accounts.
Your employees cannot beat the recovery rate achieved by professional debt collectors. A collection agency will systematically collect your outstanding AR using “Written Demands”, “Verbal Demands”, or “Filing a Lawsuit”, or a combination of all these services. They are aware of the latest laws and have access to advanced tools that assist in the debt recovery.
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Depending on how old your unpaid bills are, here is a simple chart that suggests which collection service should be used.
Service Options & Our Fees
Depending on how old your accounts are, we recommend one of the following two options.
Option 1: (Contingency only collections)
Most popular – A professional debt collector calls your debtor multiple times
There is no upfront fee. We do not make anything until we collect. You keep 60% of the amount collected, we keep 40%. This service is recommended for accounts between 120 days and 3 years past due, regardless of the balance.
Option 2: (Flat-fee collections) Written Demands
This service requires you to buy a batch of accounts in advance. We send five attorney-approved written demands to your debtors under our name every 10 days. This service is most effective when your bills are less than 1 year past due.
Unpaid Bills and Small Business
Unpaid bills are a major problem in America that affects both consumers and businesses. About a third of all Americans have a debt that has gone past due it is currently in collections. This represents over 75 million people. These unpaid bills range from as little as $25 to as much as $100,000. The average amount owed is around $5,000.
An average small business has over $80,000 in unpaid invoices, and 81% of those are at the last 30 days past due. When this happens, small business owners face several challenges. These include not being able to hire more employees, buy new equipment, or do the marketing they need to grow. It may prevent them from maintaining adequate inventory. May result in pay cuts, and layoffs, leading to business failure.
Avoiding Unpaid Bills
Before it gets to a point where crucial functions, salaries, or jobs need to be cut, there are a few things that small businesses can do. While these methods aren’t foolproof, they can help minimize your risk.
- Have a policy in writing
Have a defined, written policy on accounts receivables and stick to it. You should know exactly when to take intensive steps before the situation deteriorates.
- Have Tighter Credit Policies
Many businesses have no choice but to offer goods or services on credit. Evaluate your clients rather than offering the same credit policy to everyone. Know when to cut your losses.
- Hire a Debt Collection Agency
Once an account goes 90 – 120 days past due, it may be time to do hard talking or hire a professional collector. You will never have enough time, systems, or expertise that a professional debt collection agency has.
Hiring a Small Business Debt Collection Agency
When hiring a debt collection agency for your small business, there are a few things you want to look for.
- Reviews and Reputation
The first thing you want to find out is if the debt collection company is reputable and ethical. Remember, the collection agency you use will be a reflection of your business. Using one that is overly aggressive or unprofessional will ruin your business.
- Licensing, Insurance, and Compliance
You also want to ensure that your collection agency has the appropriate licenses and insurance and is compliant with all local and federal debt collection practices.
- Collection Fees
Never go for the cheapest collection agency. You get what you pay for. But typically, an agency charging a flat fee or around 40% is considered fair enough.