Don’t Leave Money on the Table: How to Work with a Collection Agency for Improved Cash Flow

Hiring a collection agency for your business can be an extremely smart move and a strategic advantage in improving your cash flow. If you have customers who are consistently late or who have not paid you at all, and those are piling up, it’s time to make that decision.

However, effective debt collections happen when you have the proper documentation in front of you. Having a paper trail, as they say, can increase the chances of getting the money owed to your business. Being organized and proactive can make a big difference in the amount of money you collect.

If you’re hiring a collection agency to improve your business cash flow, here are some things to consider to ensure you can collect the money owed to your business.

Organize and prepare your documentation

If you’re going to collect late and unpaid invoices from your clients successfully, you’ll need to ensure that you have proper and up-to-date documentation on each account. Having this can make a big difference. If you’ve decided to use a collection agency for your business, you’ll want to gather any documents that back up your claims.

• Signed contracts or agreements
• Invoices with due dates clearly stated
• Payment history, including any partial payments
• Correspondence such as emails, texts, or letters showing follow-ups or payment promises to pay
• Notes from phone calls or meetings
• Credit applications or customer profiles

Communicate customer details

Providing your collection agency with any customer details about the account and your arrangement can go a long way toward providing more details about the delinquency. For example, is your customer disputing any charges? Is your customer angry about a situation or the service you provided? Have they gone silent and stopped communicating? Or are you dealing with a long-term customer who now has payment issues? All this information helps your collection agency strategize how to work with your customer.

Consider prioritizing longer or larger delinquent accounts

Not all your delinquent accounts are the same. Some businesses consider prioritizing certain delinquent accounts to maximize cash flow. You can inform your collection agency about the accounts you want to prioritize, but many businesses focus on older delinquent accounts. Since older debts are more difficult to collect, it makes sense to get going on those immediately. If you’re struggling with cash flow, you may want to prioritize higher-value accounts that can bring in more cash sooner.

Let the debt collection agency do its job

Once you have submitted accounts to your collection agency, the best thing you can do is let those professional collectors do their job. A collection agency will have a strategy and a cadence for collecting from your customers and it’s important to allow them time to work with your customers. You should also stop contacting your customer regarding the delinquent account. If you want to continue to do business with that customer or patient, you can do so. But let your collection agency mediate your dispute.

Keep your internal accounting system updated

To avoid any confusion and to not interfere with the debt collection process, make sure you note in your accounting system the accounts that have been placed in collections. This helps you avoid contacting customers in duplication and it also helps you keep your accounts receivable documents up to date.

Stay in touch with your collection agency

Here at American Profit Recovery our clients have access to APRweb which allows clients 24/7 access to regular updates. Whatever collection agency you use, make sure there is consistent communication between your business and the agency. You will also want to be available to answer any questions that may arise from interactions with your customers.

Learn and adapt from patterns that arise

When you get serious about following up with late and non-paying customers and use the services of a debt collection agency, you can begin to identify patterns with the types of clients you have. You can identify the types of customers that tend to go unpaid, you can improve your contract and agreements. You can update payment policies and communicate those with your customers. And you may want to even tighten up your credit terms or update late fee structures.