From a consumer perspective, borrowing money is easy. Of course, this assumes you can convince someone to lend it to you. At the time, you’re in urgent need of that cash, so sometimes, you take it without fully thinking about how you’ll pay it back. Then things happen and keeping up with payments becomes a problem.
Sometimes, missed payments are due to genuine reasons, like financial emergencies, health crises, loss of income, or unexpected expenses. Other times, a debtor can’t keep up because they have mismanaged their finances or misplaced their priorities. They may need a little help getting their numbers in order so they can stay on top of their debts.
On the other hand, it’s impossible to run a business without some aspect of debt. Businesses may borrow from a bank or get venture capital from investors. This could be a short-term loan for start-up costs or a project-based fundraiser. Similarly, they have to extend credit to their customers. It might be a hire purchase agreement or an instalment plan for services.
Another common form of credit is when a business supplies FMCG to a seller and will be paid after the goods have been sold to customers. In all these situations and others that we haven’t mentioned, there’s a payment agreement, whether in verbal or written terms. The trouble starts when the debtor doesn’t follow through.
Many such agreements give a 30-day payment window, though some invoices can stretch as far as 90 days. Once the debt has gone unpaid for 120 days, it may be time to seek stronger measures. Up to this point, it’s likely that the accounts department has sent weekly or monthly reminders. They may have called the debtor or even visited their offices.
Pursuing unpaid invoices takes time away from your team’s other tasks. These reminders and visits will often fall to a junior accountant. This accountant might also be in charge of invoicing, corporate bills, petty cash, office supplies, and bookkeeping. When he or she has to leave the office or make a long phone call, it disrupts their day.
In addition to the time it takes, your employee may become stressed. They are young and inexperienced, yet they will have to deal with the evasiveness, displeasure, and sometimes outright hostility. It ruins their day and can lead to long-term frustration and job dissatisfaction. Chances are they’d rather deal with endless files that receive client insults.
Aside from the cost of time and the psychological effects, sending interns and junior accountants to follow up unpaid money isn’t very effective. They will easily be intimidated by big companies, or even by obnoxious tactics. It’s far better to hire a professional debt collection agency to do all the legwork.
Debt collectors are specially trained to deal with all kinds of situations. They can handle negative responses far better than your in-house team so that you can avoid unnecessary stress. By keeping your team focused on tasks they are more comfortable with, your company’s productivity levels will raise, and everyone will be happier all round.
Outsourced debt collection is more effective. Your debt collector has had years of experience in reclaiming unpaid bills, and they approach your debtors in a calm, professional manner. Rather than bullying or intimidating them, debt collectors work with your customers to develop a payment plan that works for everyone.
While getting outside help might seem like an additional expense, it can save you money. Collections consultants can recover your cash much faster, using systems that are simpler, more efficient, and more effective.
You might be worried about giving up a percentage of your payments, but it would be much harder for you to recover the money on your own. Usually, by the time you call in a debt collector, you’ve given up. They can help you restore your funds and your peace of mind.
The largest benefit of hiring debt collectors is freeing up your employees to focus on what they’re good at.