You own a large drilling company. You have a loyal customer you’ve worked with for years. You never had a problem getting paid…until now.
Currently, your customer has an outstanding balance of $100K. For months now, you’ve made phone calls and written letters – all to no avail. Word on the street is that they owe other companies money too. You’ve even heard the word “bankruptcy” floated around a time or two.
Should you continue trying to collect? Or just cut your losses and claim the deduction?
No and no.
The time for optimism and patience is over. At this point, you should contact a debt recovery firm. A reputable firm has the specialized collection skills, knowledge and experience to help you get paid. In fact, every year, debt recovery firms in the U.S. alone return nearly $50 billion to the economy.
So, ask yourself this: Would you rather recover most of your bad debt and write off a debt recovery firm's contingent fee? Or write off 100% on an unpaid $100K invoice?
If you're wondering if a recovery firm is the best choice for one of your overdue accounts, these considerations may help you decide.
When is the right time to bring in a debt recovery firm?
When accounts reach 90 to 120 days past due, it’s time to place them with a debt recovery firm. But the sooner the better. Some companies place accounts at 60 days.
What if the account is more than a year old? Is it too late?
To be honest, once an account hits a year old, it's only about 10-15% collectible.
However, when you work with an experienced debt recovery firm, they can assess the situation and advise you on your best options going forward. It may include trying to collect the debt for a certain time period before litigating, or going straight to litigation.
How much will a debt recovery firm cost my company?
It depends on the outstanding debt. As with any service, you want to get the most bang for your buck. That’s understandable. But as the saying goes, “you get what you pay for.”
When it comes to debt collection, the lowest bidder can often translate into poor results and shady business practices that can damage your business reputation. That’s why it’s important to look beyond cost when shopping around for a recovery firm to help you.
What are the risks of not collecting?
Companies are often concerned about harming relationships with customers if they hire a debt recovery firm. But the risks of holding onto a delinquent account are far greater.
If a customer hasn’t paid you in six months, they’re not going to suddenly have a change of heart. There’s a reason you’re not getting paid and a debt recovery firm can help you find out why, through in-person visits to the debtor and asset investigations. They can leverage that information to get you paid.
Also, at any given time, most companies have approximately 3-7% of customers who are not paying. That may not sound like much. But when outstanding balances are in the thousands or hundreds of thousands, it can cripple your business.
That means you can’t invest in new initiatives to expand your market share. Worse case scenario, it may wipe you out completely – and you can say good-bye to your dream of passing on the family business to your kids.
Why should I outsource delinquent accounts to a business debt recovery firm?
Because your cash flow is at stake. You have legitimate receivables to collect and your letter writing campaign and phone calls aren’t working.
A professional debt recovery firm is trained to handle these kinds of serious situations. They can coordinate an entire network of private investigators – who can be on your case in a matter of hours – investigating the debtor company and why they haven’t paid. They also have collectors on staff who understand the psychology behind motivating people to pay. In the end, your chances of collecting on the account are far greater.
There are times when trying to collect yourself isn't going to work. In those cases, you want help from a team who'll give you the greatest chance of getting your money. If you're trying to make the decision, these are the main factors to guide your choice.