In running a business, it is inevitable that you end up having customers who will owe you money for the products or services rendered to them. A business that has accumulated many uncollected receivables can be in trouble if, and when, these receivables become difficult to collect and have piled up. Aside from the issue of “trust”, uncollected debts can eventually affect the financial condition of a company.
But what are the instances when a collecting agency needs to take over uncollected or delinquent accounts. These are the questions that would have to be asked before making a decision:
1) How much is involved? Large unpaid debts can be a big loss to any business. If your staff had made many attempts to collect from the customer, and failed in their attempts, you may have to ask yourself if you would be willing to let go of such huge amount, continue to use internal resources to do it without the assurance of collecting, or should you just let a collecting agency take over the account.
2) How long has it been? Time is of the essence in debt collection. When the debt has been uncollected for several months, it’s about time to ask yourself, how long would you have to wait? One tip is to assign collection period for each customer depending on several factors (like if it’s the first time the customer has been unable to pay, how long he has been your customer, and how well do you know the customer). If the customer fails to pay during the period allotted for him, then it will be up to the collecting agency to do it for you.
3) What’s my chance of collecting from this customer? If you have spent considerable resources, correspondence and phone calls plus manpower, to collect from the customer without any assurance of getting paid because the customer refuses to pay or fails to meet his obligations, then you will need to assess your chance of collecting from this customer. If the chance is low (like below 50%), then it’s about time to turn this customer over to a collecting agency who can do frequent follow-ups.
Many other factors can help you gauge how far you can go with doing the collection on your own. But when time, resources, and patience have become important considerations, turning over delinquent accounts to experienced debt collection may be the best option.
