Why You Should Hire Debt Collectors Promptly
Some companies often take too long to make the decision to hire debt collectors because they may think that the debtors will meet their obligations if the credit management section keeps calling those debtors. However, waiting too long to hire debt collectors can have several detrimental effects. This article discusses some of those negative effects:
Impact on Your Business' Reputation
Have you heard of barking dogs that seldom bite? It is not advisable to wait for too long to hire debt collectors. This is because the debtors may become so accustomed to receiving calls from your credit management department that those debtors will stop taking those calls seriously. This trend can result in your business having a reputation of never taking firm action against debtors. Handing over debtors to a debt collector once a debt exceeds the time threshold set (two months, for example) can create a better reputation for your company as a company that takes matters of its cash-flow seriously.
Reduced Chance of Recovery
The longer a debt takes without being collected, the harder it becomes for that debt to be recovered. This is because the factors that caused the debtor to fail to meet his or her obligations can worsen with the passage of time. For example, a client who fails to pay because he or she is unable to sell his or her products will find it harder to pay you because business costs, such as salaries for staff, will eat up any reserves that the client had. Prompt action by a debt collector can increase your chance of recovering that money.
Impact on Your Time
Your employees should be focused on their core tasks, such as product development and marketing. However, credit management can end up taking up a lot of your company's time if you take very long to ask debt collectors for help. Core business activities will therefore not receive as much attention as they should since more time is being allocated to the attempt to collect unpaid dues from clients.
Impact on Business Relationships
Debts that have taken long to be paid can often compel the creditor to use very strong means, such as court action, to recover those debts. Such measures may create acrimony with the client to the extent that it will be hard for you to do business with that person afterward. Using debt collectors can help you to retain a working relationship with the client since firm discussions will be conducted in order to recover your dues in a courteous way.
What is the right time to hire debt collectors? Each company is different. Set realistic timelines regarding when all payments should have been made or else you involve debt collectors. You can also consult experienced debt collection agencies for advice about the deadlines that are appropriate for your line of business.