Providing your valued customers with the ability to buy goods and services now and to pay for those items later can make others perceive your business as being customer-oriented. Your customers may truly appreciate the financial benefit of being able to pay you at a later date. In some cases, they may not have been able to do business with you otherwise. However, there are times when customers do not pay within a reasonable period of time or at all, and this can place your company in financial jeopardy. If you are trying to decide if hiring a debt collection service is beneficial for your business, follow these important steps.
1. Review the Number of Outstanding Invoices
Before you can determine if you have a legitimate need for debt collection services, you need to take a closer look at the number of outstanding invoices on your books. Tally the total dollar amount of these invoices. Consider how having access to this revenue sooner rather than later may impact your ability to better manage and grow your business.
2. Assess Your Company’s Annual Lost Revenue
While your company may eventually receive payments on outstanding invoices from some of your customers, there may be many invoices that are never paid. A debt collection company may be more effective at obtaining payments on these invoices than your own team is. Therefore, it is reasonable to expect to see a return by paying for collection services.
3. Analyze Your Internal Ability to Collect on Debts
The alternative to hiring a third party to assist with the collection of outstanding debts is to do the work internally. You may have to hire one or more dedicated in-house professionals for this task, or you may need to pull one of your valued employees off of their regular duties for a period of time each week. In addition to analyzing the internal cost, consider your team’s ability to generate results.
4. Consider the Cost of Collection Fees
As you might imagine, there is a cost associated with debt collection services. The cost is usually a percentage of the collected debt. If you have minimal outstanding invoices or if the matter is a small concern, you may not be willing to pay this fee. However, when outstanding invoices are a top concern, an effective collection service may be essential.
Running your business successfully requires you to sell your products or services and to receive payment for those sales. While this sounds basic at first glance, it is an aspect of business that can be very challenging. If your business is challenged by collections issues, now may be a great time to contact a collections agency and to learn more about the services available and success rates.
