Collecting overdue accounts is one of the toughest parts of running a business. It’s complicated, often emotional, and distracts you from your core business; pretty much the opposite of why entrepreneurs go into business.
If you’re not vigilant and alert to overdue accounts, or if you’re uncomfortable asking to be paid, you can become an obstacle to collecting debt. No matter how motivated, invested, and engaged you are, there are seven mistakes these seven common collections mistakes to avoid.
- Waiting It Out.
Maybe you don’t want to apply pressure to customers, perhaps you find asking for debt distasteful, or maybe you just have other things on the go. What business doesn’t? Overdue receivables are uncollected revenue. If you’re giving business 120 days (four months!?) or more past a contractual payment date before you send the account to collections, you’re leaving money on the table. It’s expensive not to collect debt. Here’s an article that shows how quickly debt value erodes over time. In order to minimize bad debt, you must train yourself and your people to act promptly on overdue accounts.
- Inadequate Paperwork
How do you know your contracts, sales agreements, or invoices are actually as legal and enforceable as you hope they are? If you notice a pattern of customers questioning or challenging your paperwork, there’s a good chance it’s not clear or strong enough. The best way to know is to hire a lawyer to review and re-write your legal language. Yes, it’s a cost, but my customers are only too aware of the cost of NOT having enforceable contracts. Laws change all the time. A lawyer can give you a step up with extra clauses and other details you might otherwise miss. Your contracts, sales agreements, and invoices are the primary evidence that a transaction took place. Make sure it’s on solid legal ground.
- Taking Legal Action
You live up to your part of the deal when you deliver your product or service. It’s more than a little frustrating if the customer fails to pay on time. It can be infuriating. An unwelcome companion to the delays is often an unwillingness to communicate. It’s understandable why Accounts Receivable departments will launch legal action to get payment. Unfortunately, legal action introduces a new set of delays and expenses. After going to the trouble of court, a favorable judgment is just proof that they definitely legally owe you money. But while you were in court, other creditors were were busy trying to collect. And you’re out of pocket for legal expenses. You still need to collect that judgment. A good rule of thumb is go to a professional collection agency as soon as the payment is past due. You’ll recover more, and spare the lawyer’s lunches.
- Overly Eager Collections
Some businesses can become a little too aggressive collecting a debt. A close cousin to “rushing to a lawyer first” is overzealous collections. In spite of everything, the customer is in debt for a reason. It doesn’t matter if it’s a good or bad reason, the fact is they have stress, financial obligations, and needs some direction to wade through it. You’ll find a word literally printed on the walls of MetCredit USA: Respect. A professional and respectful attitude informs the debtor that you’re listening, and you’re willing to work together for a solution. It’s not a negotiation, but keep your cool, and don’t resort to threats. If the conversation takes a turn for the worse, send the account to collections regardless of how late it is. The best way to preserve your brand is to enforce the value of your products.
- Empathy Surplus
People slow to pay seem to have radar for nice people. They know your business makes and does thing for people; it’s about improving people’s lives. You’ve created a business that has identified and solved a problem. Empathy was a strength in creating your business. It’s not a weakness, but empathy can be taken advantage of. Like any bully, your position of strength will be warped into a position of weakness. Stall tactics and excuses will present a complex web that “must be really tough to deal with.” Business relationships can be tricky, overdue accounts can make them downright complicated. Your best defense is to rely on a professional collection agency. We recover overdue accounts all day, every day. If you use a debt collection agency, the only thing you’ll feel is relief.
When you put your overdue accounts in the hands of your debt collection agency, let go! You’ve done your part. That’s literally it. Once we have your overdue account files, you can go back to doing the work you love, and we’ll get to collecting. If the debtor calls, you refer them back to us. The time for that conversation is over, and it’s our turn to do the talking. Allowing debt collectors to do their job can restore relationships with your customers. We take care to preserve your business relationships, and it’s always easier if you step away from the issue. Collections is a new phase of the relationship; any negotiations at that point undermines the collection.
- Not Knowing Your Collection Agency
You know the reputation of collection agencies? Some agencies unfortunately earn those stripes. And by earn I mean they’ll charge you extra fees, fail to collect, lose your paperwork, and harass your customers. It’s an unfortunate and embarrassing reality of the collections industry. Avoiding this mistake is easy: make a list of the collection agencies that can serve your needs; check their BBB ratings; visit the office, meet them in person. I’m happy to say most companies are good. We work hard to make MetCredit USA the best, and we’re proud of our team and ethics. Whoever you choose, you’re putting your reputation and receivables in their hands.
Ready to start collecting the right way? Call us at 1-888-291-4490 or shoot us an email and experience how you can avoid all the 7 Deadly Collections Sins by choosing a professional debt collection agency.