“Want to know how a collection agency works? If yes, then this is the blog you need to read through.”
If you have started your business, then you must know that cash flow can be quite critical for start-ups. Your customers might not take you seriously, thus leading to invoice pileups on the table. Hence, you need to be very careful and the best thing which you can do to keep your company afloat is hiring a reliable commercial collection agency. Otherwise, it can get very difficult for you to survive with limited capital resources and restricted cash flow.
You should also know that the likelihood of an account getting paid declines every week. So why take a risk? Plus, here are some other things which you need to do to keep everything in check.
Accounts Receivable Best Practices
- You should do a credit review before giving payment terms to your consumers.
- You should also have a signed contract or sales order with all the terms mentioned on it. Keep prompt invoices.
- You must also make an effort yourself to follow up all the clients via email as well as phone calls. If you see that any customer is very irresponsive from the very beginning, then keep him or her in your mind.
- If you see that there is any particular case that needs your attention, then do give attention to that case. Recognize it. However, it might take some time as you have just started with your business. But if you have had ventures before, then you must know it. If there is any company or client who has constantly avoided your calls or emails, then this is the case that requires special attention.
Now, let me enlighten you about the working procedure of debt collection agencies.
Well, you must know that most agencies work on a contingency basis. That is you only need to pay a fixed percentage of the amount that they will recover for you. However, you must understand that there are many agencies who charge hidden fees! To avoid last minute surprises like this, do enquire from beforehand. Reading online reviews might help in the case. The percentages differ from company to company and can be more if the invoice is quite old.
Secondly, the well-known agencies that work with the best professionals in town have a number of tactics in their bag which they use for collection. Also, the customers value and respect the collectors more than the company employees/staffs/owners. They take them seriously and tend to pay faster. If you are working with an agency, make sure you are a hundred percent transparent.
If you think logically, a collection service agency wouldn’t cost you much as well since you will not be giving them flat fees. You will only pay once your accounts are recovered. There are many big firms who do not approach the agencies or work with them from the beginning, only to regret later.
My advice is that to start from Day 1 so that you do not leave any loophole. Why take chances? Since the agency staffs are not your full-time employees, you do not have to give them salaries, provide additional benefits or even set up a team for that matter. It is extremely convenient.
Lastly, coming back to the point where I was talking about special cases – well you really need to grow this skill and check if any customer is coming up with excuses, one after another, for days. As soon as you notice this, inform your agency to take relevant action.
I hope you now have a clear idea about how the agencies work. Trust me, it is totally worth it. To know more, please keep reading my blogs and articles.