When Good Clients go Bad
November 29, 2008
Particularly for the small business person, a good client in terms of the amount of business which he or she provides can become problematic if the client starts to get slow about keeping the account current. Unfortunately, some large businesses make a habit of paying their accounts only when absolutely forced to do so. The buyer may be practicing good cash flow techniques when he does not pay bills until they are due, but accounts receivable which are aging to thirty, sixty, or ninety days or beyond can have a drastic detrimental effect on the functioning of the small business owner.
Yet, the creditor may be reluctant to press for collection of the outstanding debt because of the fear of losing the sales volume brought in by the customer. Or, perhaps the customer has hit a bumpy stretch financially and is not paying as they had in the past. While not wanting to add to the troubles of the customer, the business must maintain its own cash flow in order to survive. If as a merchant you are in the situation of having a previously good-paying customer obviously struggling to pay, or not being prompt with payments. If the customer is making excuses, or begins avoiding your telephone calls or ignores politely worded reminders that the payment is past due–what do you do?
Some merchants avoid turning collection accounts over to a third party collection agency because of the negative press or unfavorable reputation of collection agencies in general. The other alternatives are to continue attempting the customer, or to write off the debt and forget it. Unfortunately, if this happens too many times, it may eventually have a severe effect on the business.
So, if you determine you want to retain the customer and collect the debt, what can you do? Probably your best chance of collecting the debt while retaining the customer is to use the services of a skilled professional debt collection agency. Some of the points which you should think about when you choose a collection agency are:
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Use an collection agency that is familiar with the type of business debts which you incur. For example, a debt for a doctor bill might be handled entirely differently from a debt for a student loan.
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The collection agency should be members of professional organizations and should have all appropriate insurance, bonding and governmental licenses.
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Use should obtain and check references about the collection agency in order to be sure they are dependable.
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Visit the collection agency often just observe the collectors in action and to let the agency know you care about methods.
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You should also review reports showing how successful the collection efforts have been in recovering outstanding debts.
Often, by retaining the services of a competent and professional collection agency, the customer can be retained while convincing him or her that the monies they owe to the business are legitimate and must be paid. A courteous and helpful attitude in all dealings with the debtor will always fare better than rude and overbearing collectors when retaining the customer’s business.