Sending a customer to collections can be a big step for a small business. You have spent hours cultivating new customers in your community and you don’t want to lose any business. You have a great reputation for service among your current customers and most of them are paying you on time.
But there comes a time in any size business when customers are not going to pay, and you need to implement a strategy if you are going to recover that money. Depending on the type of business you are operating you may have a regular need for debt collections, or you may just have a few accounts that have been lagging in payments.
We are often asked when and how to send a customer into collections and our experts have come up with some advice for your business.
Have you done your due diligence?
What do we mean by that?
When our experts sit down and conduct an accounts receivable analysis with our clients, we look for several things. First, are you invoicing on time and at regular intervals? It makes a big difference because if you are sending out an invoice six months after you have provided a service, you are going to have challenges getting paid quickly. As they say, out of sight, out of mind, and that holds true when it comes to customers paying for services. Customers expect an invoice so if you are not sending out invoices on time, take a step back before you hire a collection agency.
Are you using internal resources to follow up on the customers that don’t pay?
We have spoken with many business owners and others over the years about collections. And we have heard a similar story. They send invoices, never follow up and six months later when they realize that the customer has not paid, they get upset and want to send that account for collection. But they have not done the internal due diligence before contacting an agency.
Along with billing on time comes following up at regular intervals. That involves gentle reminders and statements through the mail or email if that is the preferred method of invoicing. And it also involves follow-up phone calls to understand why the bill has not been paid.
Once you have taken the steps to follow up with your customers using your internal resources, it is time to start thinking about taking the next step.
Taking the next step with a collection agency
First, find an agency that understands your business, and recognizes that treating your customers fairly is an important part of the process.
An agency can help you best when you have an ongoing need for third-party assistance. That’s when the professionals you choose can dig in, get to know you, and create a plan to get your customers to the table and improve your cash flow.
In preparation for your first meeting, you will want to update your books as best you can so the professional you are speaking with can get an entire snapshot of your accounting procedures as well as how you currently handle late and non-paying customers. Here, we offer clients an accounts receivables analysis to help determine the need for collection activity as well as the aging of your invoices.
It is important to understand the length of time your late invoices have been out there because that can determine how effective collection activity can be. And it can set your expectations. But if you have the info to back up the debt, your agency can begin contacting your customer to arrange for payment.
Once you have established your relationship, and have spent time with a collection professional, it is time to start submitting accounts. We don’t know how all agencies operate but here, our team will train you on how to submit accounts through our online portal, APRweb. It’s fast, easy to use, and can save your business a ton of time.
We advise that accounts that have gone over 60 days past due are ready to be submitted. It all depends on your comfort level, but we find that going over that can decrease results, so it is better to act sooner while the debt is still fresh on your customer’s minds.
Once you have sent those accounts over for activity, let the professionals do their job by contacting your customers and working out a resolution. If a situation comes up where there is a major dispute, you may be asked to back up the debt with more documentation. That can be done with your customer service representative.
Here at APR, we check in with our clients on a regular basis to see how they’re doing and if they are using our service the way they should be. But it is also advised for you to check in periodically and see the results of your collection activity. For APR, you can check for updates in our online portal. And if you feel like having a conversation with our customer service team, they are always ready for a conversation.
Only a handful of accounts to collect?
If your business only has a few delinquent accounts, first congratulations. You are far ahead of many other businesses.
If you occasionally run into situations where customers do not pay, we suggest contacting an attorney specializing in collections. This may work out to be a better arrangement for your business in the long run.
Does your organization have an ongoing demand for third-party assistance, or do you have a need for a nationwide debt collection strategy? Contact our team today and let’s get started!
Need to discuss your debt collection needs with APR? Call (800) 711-0023 or use the form below to request more information.