Last week we answered the question, Why Do I Have Slow-pay Accounts?If you didn’t see that blog post, click here to see Part One.
Today is Part 2. We give you more insight as to why some consumers don’t pay their bills and how to solve that issue with your business.
– Lane three (3) begins the bad debt category and is made up of those Consumers who won’t pay unless they get a Collection call or the item appears on their Credit report. By day 90 you have a really good idea who does and who does not intend on paying you. This is especially true when repeated invoices, customer service calls, and collection letters haven’t resulted in payment. Queues that a consumer fits lane three tendencies include: Recent job loss; Unexpected health issues (consumer or spouse); or Their phone number is disconnected (this is a much worse sign than a mail return considering people do move and may not have received an invoice, but people typically go to great lengths to keep their phone number… Unless they would rather not be receiving calls). Expect one or two of these out of one hundred account (1-2%). Be prepared to elicit the assistance of a Collection agency with the wherewithal to skip trace for new employment, addresses, and asset information; and an agency who not only reports to the credit bureau, but who actively manages accounts sent to reporting agencies.
Lane four (4); Those who will never pay and/or only pay if they get sued, is the definition of bad debt. It’s worth attempting to collector from them, but it’s wise to use your resources intelligently. Scoring accounts and scrubbing for historical data is crucial to identify these individuals early on in the collection process. Queues that a Consumer fits lane four tendencies include: Intentions to file and/or prior Bankruptcy filings; The Consumer or his/her spouse passes away; And a history or liens and/or judgements placed against them and/or their spouse. Expect one or two of these out of one hundred account (1-2%). Be prepared to partner with a Collection agency with a proven track record and enough knowledge of and connections within the credit industry to pull credit reports, produce credit header scoring, locate decease records, and locate prior Bankruptcy, Lien, and Judgement filing information.
If you’ve come this far it means you’re passionate about the products or services you provide, the company you’ve built, and the difference you make. American Profit Recovery certainly is. What you probably weren’t told is being in business means having slow-pay and delinquent accounts, it just does. Having a system in place to deal with slow-pay and delinquent accounts before they become problematic means keeping the cash flow moving. And cash flow is the linchpin of small businesses everywhere.
One final note: Hire a reputable Collection agency. You wouldn’t’ hire someone off the street without having a job application, a background check, and conducting an interview so don’t partner with a Collection agency without similarly going through the vetting process too. Having this relationship in place before there is an urgent need makes good business sense.