No business, whether large or small, can afford to ignore customers who are not paying their bills.
The effects of this on an organisation can be severe:
- firstly there is the obvious issue of cash flow because if you are struggling to obtain payment from your customers than that in turn may be directly and negatively affecting your ability to pay your suppliers and others around you;
- then there is the question of management overhead. Unpaid bills are sometimes referred to as receivables and the effort of trying to manage the recovery of sums sitting on your receivables ledger can be significant. Phone calls, letters and occasionally perhaps moving to a legal action, can all be exceptionally time consuming;
- finally, there is the sometimes under-estimated psychological effect of the stresses involved in confrontational discussions with people who owe you money.
Although there are a number of business techniques you can apply in order to try and reduce the number of slow or non-paying clients, in reality you may have to accept that a certain percentage of your customers are likely to occasionally be difficult to recover money from.
In such a situation, you may be faced with a choice of either trying to recover the monies yourself or hiring a specialist organisation to do so for you. These specialists are often referred to as collection agencies or sometimes debt collection agencies.
If this sounds to have certain underworld-type connotations, today nothing could be further from the truth. Collection agencies must be licensed and regulated - and their activities are strictly defined and controlled.
What they may be able to provide your organisation with is:
- effectively, the outsourcing of your credit control department meaning that they would take over responsibility for obtaining payment from all of your customers who had not paid within a specified time;
- in other cases, they may simply take on what are occasionally called significantly aged accounts – in other words, those hopefully few people who are simply not paying you at all;
- take all the legal steps necessary to pursue the individuals concerned for the due payment including, if necessary, taking action through the courts to progress matters;
- remove from you, all the unpleasantness that can be involved in writing chasing letters and making difficult phone calls;
- undertaking traces to find people that have disappeared when owing you money.
It is typically the case that collection agencies may be able to recover sums of money that you yourself may have started to mentally write-off is a potentially unrecoverable debt.