When To Use a Debt Collection Service

Invoice Reminder

When Should You Consider a Debt Collection Service? 

Most business owners will reluctantly consider professional debt collection at some time in their professional careers. Slow pay and no pay customers are a fact of life that many of us can’t avoid.  

In my professional opinion and that of many if not most agency owners, the average small business owner waits far too long to seek professional debt collection services, resulting in unnecessarily low recovery rates. 

So how do you know when? What is the right time to escalate debt collection and get a reliable debt collection service provider involved?

Six Signs that it’s Time to Turn to a Professional Debt Collection Service

  1. You’re thinking about your debtor and the money he owes you after hours.  Accounts receivable and bad-debt collection are business functions. If you’re thinking about your debtor when you should be sleeping or enjoying your family, it’s time to consider professional debt collection.
  2. Your Cash Flow is Negatively Impacted.  Are you avoiding your creditors because cash is tight? Don’t allow customers to impact how you pay suppliers and employees. When you can’t pay who you want to pay when you want to pay them, it’s time.
  3. You are Neglecting Your Core Business to Chase Debt. Are you engaging in debt collection work instead of work that builds your business and produces income? Consider the opportunity cost of collecting old debt instead of generating new revenue. It’s time to consider a debt collection service when low-level collection work takes precedence over focus on your core business.
  4. Your Bookkeeper is “too busy” to Do Collection Work.  Look up the qualities of a good bookkeeper, and right alongside organized, computer literate, and good math skills, you’ll find good communication skills. Talk to a few bookkeepers, and you’ll find people who are organized, like to solve problems, and prefer numbers to people. Small business owners mistakenly assume that a bookkeeper can and should be able to collect late receivables. Not necessarily so! Professional Accounts Receivable and Bad Debt Collectors will recognize the red flags that tell them when to use a debt collection service. Those same warning signs may just annoy your bookkeeper. To get the most out of your available resources, let bookkeepers keep books, and expert debt collectors collect debt.
  5. Your Sales Reps are Chasing Your Customers for Payment.  Small business owners and sales reps alike often believe that the sales department should handle the collection of delinquent accounts. We disagree. The conflict between sales and accounts receivable in businesses of all sizes is well established. Salespeople believe we’ll say something we shouldn’t, possibly damaging their relationship with the customer. Business owners believe that to earn their commissions; salespeople should finish what they started. We believe this is a poor use of resources and that sales reps should focus on growing your customer base, hence your business. Business owners should focus on solving problems, and collectors should collect. It’s the opportunity cost again. When sales reps are collecting, they aren’t selling, leaving prospective sales to your competitors.
  6. And Last But Not Least, how old is the invoice? Has your customer broken more than one promise to pay? Click here for a complete list of Red Flags and Warnings Signs – the more of these you see, the more likely it’s time to engage a debt collection service.


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