Any business that provides credit terms to its customers will face occasional challenges collecting debt. It simply comes with the territory.
Yet not all entrepreneurs are comfortable sending overdue debt to a collection agency—even when experience shows that aging accounts bear an ever-increasing risk of morphing into bad debt writeoffs.
Ironically, the most common reasons business owners and AR Managers give NOT to use a collection agency are based on old misconceptions. Here are 5 reasons to never use a collection agency, all of which are completely wrong.
1. Paying Commissions is a Waste of Money
If you had no trouble collecting accounts receivable, paying a collection agency could be rather silly. But when a debt becomes past due, that changes. Statistically, money owed to you is less likely to be recovered with every passing day. Chasing overdue accounts takes you away from the tasks that make you money, creating massive unseen costs. Meanwhile, the statute of limitations on debt is as little as 2 years in most provinces. So (especially compared to the prospect of never being paid), collecting an aging account quickly through the help of trained collection professionals is excellent value. That’s why the most consistent clients of collection agencies are savvy, experienced businesses whose leaders understand the importance of smooth-running accounts receivable.
2. You Don’t Want to Burn Bridges
Fear of harming hard-won relationships is a paralyzing fear of entrepreneurs. The truth is, it’s your non-paying customer threatening the relationship. Your payment terms are an agreement, and as the vendor you have already made good on your end. It is perfectly fair to escalate the situation after a reasonable time to protect your business and honour your own commitments. A good collection agency creates a buffer between your business and the customer, acting as on your behalf as an independent third party. Good customers will respect you and come back. Bad ones … well, they can go to your competitor. 😉
3. Sending Files to Collections is a Pain in the A**
I hear you. With most collection agencies, it can be a frustrating process sending information in bits and pieces, going back repeatedly as you’re asked for missing files and documents. It also creates a lot of room for errors and delays that benefit the debtor. That’s why at MetCredit we’ve developed a truly one-of-a-kind online debt collection system that helps you to submit accounts quickly and easily. And you can use it day or night, because entrepreneurs often have other things to do during business hours. Once we set you up, collecting gets super-easy!
4. A Collection Agency Can Harm My Brand
For a time, the collection industry developed a bad rap. Some operators adopted a heavy-handed approach, even bullying or threatening debtors. At MetCredit, we more than took the high road, but paved a new one. Since we began back in 1973, every single thing we do is centred around RESPECT for the individual. We help struggling customers find ways to pay, proactively and creatively. Our agents have helped many unemployed debtors to find a job—and some have even come to work for us! It’s why some of Canada’s most successful businesses from coast to coast trust MetCredit with their brand reputation management. It’s also how we’ve sustained an A+ rating with the Better Business Bureau for nearly half a century and have (by far) the greatest number of positive online reviews in the industry. That kind of leadership doesn’t happen by chance.
5. It’s Smarter to Sue for Unpaid Debt
Sending overdue accounts to lawyer-land is one of the most costly mistakes a small business owner can make. Legal fees are always expensive, and are 100% payable regardless of whether or not you win your case. Waiting for a court date wastes valuable months, and even if the judgment happens to go in your favour, you still have to collect on it! Many law firms turn to MetCredit to collect their own unpaid fees and court judgments. In the vast majority of cases, going to court is completely unnecessary. (Check out this very popular article about why it’s crazy to sue over business debt.) MetCredit pays all costs and disbursements up-front, and if we don’t collect there is no cost to you.
There is no shortage of reasons it makes good business sense to have a collection agency as an extension of your business. It’s the lowest-cost, easiest and most trouble-free way to keep cash flow healthy and your client list robust. If you have questions, be sure to send me a note, or connect with me on LinkedIn.