When your company is dealing with past-due customers, it can be difficult to know when to turn to a commercial debt collection agency or pursue litigation. Before moving forward, consider the steps you have taken so far to collect on the payment. Here are some questions you might ask yourself:
For more information on the fundamentals of collecting on commercial debt payments, check out our blog post on the subject.
If you can answer yes to most of the questions above, your company has done its due diligence. Consult a professional agency if one or more customers have been unresponsive and elusive, are refusing to pay, have extenuating circumstances, or if you need legal advice.
A commercial debt collection agency has the time to execute diligent, assertive and tedious collection strategies, conduct research into your customer’s business and financial situation, and locate hard to find debtors. An agency will also have expertise in negotiation, and be able to offer creative approaches to your company’s unique circumstances.
When it comes to A/R recovery, the longer the account remains unpaid, the less likely it will be collected. Invoices seven months late are fully paid less than 50% of the time. Before it’s too late, you need to deploy recovery strategies that are effective and efficient.
An proven commercial debt collection agency will be able to formulate tactics that motivate your indebted customer to prioritize making payment. Agency experts can use their knowledge and experience to appropriately word default notices that are firm, yet diplomatic. They also know how to strategically time phone calls, emails, and other means of communication with customers. The bottom line is that delinquent customers are more likely to take a notice seriously when it comes from a third party.
A professional commercial debt collector understands that even though a commercial customer may owe you money, you may still need to maintain a good relationship with that business. You don’t want to burn a bridge you could have spared with some negotiating and flexibility, and you want to keep a good reputation in your industry. Not all debtors fall into the same category, and so different strategies may need to be employed based on the indebted customer’s situation, and your company’s relationship with the customer. Some situations require a tough and unconditional approach, while others might call for some negotiating and creative problem solving, such as partial forgiveness or payment arrangements.
Agencies also have the capacity to research debtor company credit and other relevant information, in order to determine the most appropriate action. The agency can complete a thorough asset investigation and provide you with a complete history of the debtor’s payment trend and financial status. Other investigative methods can uncover hidden assets of the indebted company that may be used to fulfill the debt owed. This process can also reveal any bankruptcy red flags.
Commercial debt collection agencies possess the resources to track down even the most elusive indebted customers; a collection tactic known as “skip tracing”. With the sheer amount of data available today through the internet, with access to the proper databases and resources, it is possible for so-called “skip tracers” to find who they’re searching for in a relatively short amount of time.
Although there are no federal laws regarding commercial debt collection, each state has its own regulations, and professional associations, such as the International Association of Commercial Collectors (IACC), hold agencies to ethical guidelines. A professional commercial debt collection agency will be able to navigate you through the woods of debt collection legality. If you are considering hiring a commercial debt collection agency, make sure they are a member of professional associations and are knowledgeable about your state’s commercial regulations. An agency will also be able to advise you on whether to seek a court-based remedy to ultimately collect on the debt, i.e. filing a lawsuit.
In some cases, litigation is the only way to create enough of a sense of urgency for the customer to pay. Commercial collections agencies will be able to refer your case to collections attorneys, and many agencies have attorneys in-house. If you decide to pursue litigation, hiring a commercial collections attorney is beneficial because they can file a legal claim on your behalf and represent you throughout the subsequent case.
In order to make a viable case and obtain a judgement in your company’s favor, substantial evidence of the debt will need to be presented in court. This is why it is recommended to always put all payment terms and policies in writing. Without the knowledge of a legal team, debtors can employ maneuvers to forestall the legal proceedings which can escalate litigation costs for you, or undermine your standing in the litigation.
Even with a favorable judgment for a business debt, you will not always automatically receive the money owed. It is sometimes necessary to implement ways to force collection of the judgment. Judgment collection methods include securing liens on the property of the business debtor, garnishing their business assets, or obtaining a writ of execution to seize assets from the business’s accounts or property. A collections lawyer can also guide you through the process of collecting on your judgment.
Does your company periodically experience sluggish A/R cash flow? The permanent solution to any commercial debt collection problem is a simple phone call away. Contact Miller, Ross and Goldman’s dedicated team of master collection strategists today and GET PAID!