By Dean Kaplan, CEO and President, The Kaplan Group
In this difficult economy, many businesses are having a hard time paying their bills. Having unpaid invoices can start a chain reaction in your own business. Not receiving payment harms your cash flow and takes up your time. Instead of pursuing new clientele, new marketing initiatives or product ideas, you are busy chasing down clients who owe you money. Often, hiring a collection agency is the best way to get the most money out of unpaid invoices. You can do things to improve both your chances of getting paid and the total amount you recover.
- Act Quickly
One of the best ways to make sure you get all of the money you are owed is to act quickly. Once a debt is three months overdue, your chances of collecting on it are 74%. The longer you wait to take action, the less likely you are to get paid. Instead of spending months trying to solve the problem yourself, bring in a Commercial Collection agency quickly. If the company that owes you money goes out of business or goes bankrupt, you have very little chance of collecting from them.
- Do Your Research
Not all collection agencies are created equal. First, confirm that the agency does B2B collections. Then ensure that they are bonded, licensed and insured in your state or multiple states, depending on where your clients are. Finally, you should investigate their typical clientele. Some agencies specialize in securing funds from large companies, while others do well with small businesses or home businesses. Check their reputation with the Better Business Bureau and make sure there are no complaints against them. When you hire a collection agency, they represent your business. You want to ensure that they don’t damage your reputation.
Most reputable B2B collection agencies work on contingency. This means they don’t get paid unless they collect for you. Make sure to ask about both the agency’s collection success rate and contingency rate.
- Be Organized
Make copies of all invoices, contracts, and other information such as email communications that will help the debt collector understand the situation. I have turned down accounts that did not have proper documentation. Although it’s always my goal to avoid going to court, I want to know that we have the correct documentation to win the case if an account has to be taken to court.
- Don’t Negotiate Alone
Too often, businesses will attempt to negotiate a payment deal before turning the invoice over to a collection agency. Unfortunately, if the client doesn’t pay, they now know that you’re willing to accept less than the amount owed. This puts your collection agent at a disadvantage when he or she begins the negotiation process.
- Allow the Collector to Negotiate
Although you don’t want to negotiate away potential payment, you want to let the collection agency do their job. Insisting that you will only accept payment in full prevents the collection agent from using their professional knowledge to obtain as much of the money as possible. The collection agent may choose to waive interest payments or late fees so that you can be paid more quickly. They may also recommend a quickly delivered lower payment instead of insisting on the full amount paid over time based on what they learn during the collection process. With a reputable collection agency, you are always in the driver’s seat. Feel free to ask questions and make sure you understand the deals being offered.
If you have unpaid invoices, hiring a collection agency can be a business-saving act for you. Make sure you fully understand how a specific agency works before allowing them to represent you.
Dean Kaplan is president of The Kaplan Group, a commercial collection agency specializing in large claims and international transactions. He has 35 years of manufacturing, international business leadership and customer service experience. Today, he provides business planning, training and consultation to a variety of global companies.
