Top Three Commercial Debt Collection Obstacles Facing Business Owners

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Business revolves around credit.  It is good business strategy to extend credit to credit-worthy customers.  There are times when this “buy now, pay later” strategy backfires.  Sometimes a debtor cannot pay for the things purchased on credit.  You may not have any other option but to hire someone to collect the money that is owed to you.  It is not always as easy as it may seem to convince someone that he has to pay up.  There are a number of hurdles to cross before a collection agency can mark their account as “account received.”

1.       Excuses From The Debtor

Some debtors are truthful and relay their problem with temporary cash flow to the collection attorney.  Others, however, come up with every excuse under the sun.  Beginning with the often cited “the check is in the mail” to someone in their family died, even if that is not true, it is sometimes impossible for the collection lawyer to tell fact from fiction.

2.       Business Closing

When a business cannot sustain itself any longer, it will have to close.  This is usually at great cost to the owner and his creditors alike.  While this is unfortunate, better business practices would have prevented going into debt collection.

3.       Entering Bankruptcy

Once the debtor is in such dire financial straits that he must file for bankruptcy, all financial obligations are processed by the bankruptcy court.  A collection agency, or collection law firms, will have to turn toward the court to recover as much as possible of the owed debt.

It is usual practice to call a debtor first to remind them of their account in arrears.  A letter referring to debt collection would be the next step.  The last course would be to hire a collection attorney.  When all your efforts do not produce any satisfactory results, you may have to hire a collection law firm to recover your money.  Problems of this nature can often be avoided by a proactive business approach.  

Key Ways To Deal With Collections, Receivables and Credit

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A well-managed accounts receivable can be one of the biggest assets to a company.  It can give them the opportunity to leverage cash quickly and efficiently when records are well-kept and when working capital is needed.  For a long time this department was viewed as a basic necessity.  Recently, companies are beginning to look at it in a much different light.  It is becoming widely accepted that the better managed accounts receivable the better financial opportunities a company will have. 

Though a company may deal with either consumers or commercial companies, and therefore either many small invoice balances versus a few large invoice balances, the fundamentals of each are the same.

The Three Steps Of Accounts Receivables Are:

• Process of Remittance- methods of payment or an automatic process will be set up. 
• Management of Credit- This will include informing client of policies, checking credit and getting approval as well as maintenance of credit. 
• Collecting- This step can include technology, different techniques as well as ways to motivate or monitor both external and internal agents. 

It’s important that you don’t underestimate the role that great customer service plays in any of the above processes.  Having a good relationship with the client throughout can help to speed the process up.  It’s a good idea to incorporate a customer focused approach into each of the above steps for accounts receivable. 

Not so long ago there wasn't much done on credit, so accounts receivable wasn't as essential as it is to today’s companies.  These days, however marks a difference in how we view cash flow.  A healthy portfolio of companies that have credit lines means the company has the opportunity to collect and increase their cash flow.  Likewise, companies expect to be able to purchase on a credit line and pay as needed so this creates a new way of looking at cash flow.  

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