How much of your time is spent attempting to collect on overdue
accounts instead of servicing your "good" customers? It's a nasty job, but it
must be done. No business owner enjoys playing the "bad guy" by sending overdue
bills or "reminder" letters. But debt collection is an inevitable part of doing
business.
What if you could avoid drafting those reminders or making those
awkward phone calls to your customers? What if you play the "good guy"and still
collect on your bad accounts? You can! Consider letting a third party deal with your bad
debt. They do the dirty work and you get paid.
Bringing in a third party usually means hiring a lawyer or a
collection agency. These professionals specialize in debt collection. They usually work by
sending stern letters or making phone calls to your delinquent accounts. You can always
send your own letters and make your own phone calls on your accounts; however, the very
thought that the debt has been turned over to another party is often enough to instigate
the customer's action in paying off the account.
A good collections professional can save your business in three
different ways. First, you don't have to risk being impolite with customers and thus lose
their business or that of their friends. Second, you don't have to waste your time trying
to collect on these bad accounts. Third, collection professionals normally work on a
contingency basis, so their services are essentially free to you.
Because most collection professionals attempting to collect
"large" accounts work on a contingency basis, you pay them nothing to get
started. Instead, the agency keeps a percentage of any recovered amount they collect on
your behalf. This fee usually ranges from 20 to 50 percent of the recovery. While this may
sound high, consider that this is money you may never be able to collect on your own.
Keep in mind, however, that some collection professionals, and
especially those working to recover "small" accounts, will not work on a
contingency basis. Instead, you will pay a fixed fee for the collection professional's
services. Either way, however, you stay the "good" guy while someone else does
the dirty work!
Polk & Associates
February 2000