| Bad debts affect small businesses more than | | | | aware of the state and federal laws regulating |
| large businesses. Large businesses have the | | | | debt collection. Violation of these laws will cost |
| buffer to survive bad debts while small businesses | | | | your business more by landing you in legal trouble. |
| do not. If small businesses do not get payments | | | | How does a collection agency help small |
| on time, they cannot reinvest in the business for | | | | businesses? |
| lack of funds and have to stop operations. Many | | | | Collection agencies can help small businesses |
| small businesses have actually shut down because | | | | improve their bottom line considerably. Many |
| of their inability to recover bad debts. In such a | | | | collection agencies deal with small business |
| scenario it is important for all small businesses to | | | | accounts, and charge accordingly. The fact that |
| partner with a debt collection agency. | | | | you have partnered with a collection agency will |
| Why is it difficult for small businesses to collect | | | | make customers take you more seriously. |
| bad debts? | | | | Collection agencies have skilled staff trained in |
| Some of the factors that make collecting debt | | | | debt collection strategies. They are well-versed in |
| especially difficult for small businesses are | | | | debt collection laws and have a professional and |
| described below: | | | | cordial approach towards customers. The |
| Avoiding unpleasantness: Collecting debt is an | | | | collection agencies will charge a fixed rate or a |
| unpleasant task. As the business is small, its focus | | | | percentage of the debt they collect. They have |
| is on getting more business and retaining existing | | | | greater incentive to recover debt faster. |
| customers. Despite the fact that customers are in | | | | Collection agencies collect debts through a |
| the wrong in delaying payments, the business will | | | | four-phase process. The process involves sending |
| not remind them of the dues too often for fear | | | | out demand letters to the customer, contacting |
| of losing further business. Customers understand | | | | customer through phone, reporting customer to a |
| the predicament of small businesses and take | | | | credit rating bureau and filing a lawsuit in case of |
| advantage of it. | | | | non-payment. |
| Short of resources: Small businesses do not have | | | | The demand letters or notices sent out by the |
| the resources to recover bad debts. Collecting | | | | collection agency give details of the debt, the |
| debt requires keeping accurate records of debt | | | | amount due and a payment due date. The third |
| and credit transactions, sending out reminder | | | | and last demand letter warns the customer of |
| letters regularly, calling up customers, visiting | | | | being reported to a credit rating bureau if the |
| customers and regular follow up. This needs time, | | | | payment is not settled by the specified due date. |
| manpower and money. Small businesses are short | | | | The warning will push most customers into settling |
| of all three. | | | | their dues as a report to credit rating bureaus will |
| Using in-house staff to collect debt: Small | | | | hurt their creditworthiness. |
| businesses try to save money by recovering bad | | | | Collection agencies fall cheaper in the longer run, |
| debts themselves. The business gives the | | | | as they recover the bad debts you would |
| responsibility of debt collection to an Accounts | | | | otherwise write off. Collection agencies will |
| Receivables person. This is not very effective and | | | | recover your debts in a professional manner, |
| rarely results in quick debt recovery. | | | | thereby enhancing your customer relationships. |
| Firstly, the Accounts personnel are already | | | | With a collection agency as your partner, you can |
| swamped with work, and cannot put in the | | | | focus on your business operations without |
| required time and effort to collect debt. Secondly, | | | | worrying about funds. Before you hire an agency, |
| debt collection is a delicate task that needs to be | | | | compare collection services price quote at a |
| handled with finesse. Accounts personnel can in | | | | Business Network. For further information, read |
| fact spoil your customer relationships by being | | | | our collection agency advice. |
| tactless. Thirdly, in-house personnel may not be | | | | |