Overdue bills - don't let myths cost you money

February, 2011

For many small businesses collecting overdue bills can seem like a major hassle that they'd rather avoid. Between potentially losing the customer if you lean on them too hard and the costs associated with outside help many smaller firms prefer to chose the easy option and just let it go.

However, these concerns are based on a number of myths and these myths are probably costing you money. Here are the 5 myths of debt collection and what you can do to collect those outstanding bills.

5 debt collection myths

  1. Debt collection services are something only big companies use.

    Wrong. Thousands of small businesses refer debts every day ranging from a few hundred dollars through to tens of thousands of dollars. These businesses recognise that their expertise is related to their product or service, not collecting money. They use third party debt collectors like D&B because they know their chances of being paid increase significantly and they only get charged when outstanding debts are collected.

  2. Debt collectors are something you use when overdue invoices are extremely delinquent.
    The truth is the earlier you refer the debt the more likely it is to be collected. Research shows that debts referred for collection at 30+ days overdue are nearly three times more likely to be collected than those     referred at 90+ days overdue.

  3. Using a debt collector means losing a customer forever

    The truth is this depends on the debt collector and when you refer the debt. A good debt collector understands that their job is to collect the money you are owed while helping you maintain your customer relationships. By referring debt early and using a collection agency as part of your normal accounts receivable process you can ensure the agency complements your in-house collection efforts, protecting your brand, while still escalating pressure on your debtors so you get paid sooner.   Make sure your collection agency is reputable and takes your brand as seriously as you do.

  4. There is less risk using a lawyer than a debt collector

    Not only is this not the case but generally it's also a recipe for higher costs and a much more formal process creating barriers between you and your customers. Good receivables management is about working with         customers to identity why an invoice hasn't been paid and establishing a process to ensure payment. 'Going legal' is costly and highly likely to end the customer relationship. Accordingly, going down the legal path should be a last resort.

  5. The cost of a debt collector can't be recovered from the customer
    Collection costs are absolutely recoverable. A good collection agency will work with you to ensure your Terms & Conditions clearly state that failure to pay will result in penalties and recovering costs will be a priority in the collection process. 

To find out more about collecting overdue debts click here >>

Need help collecting overdue bills? D&B Collect is a service designed especially for small businesses. 
Find out more here or contact Client Services on 13 23 33.

 

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