Debt Collection StrategiesIt is not easy to get struggling businesses to pay you, albeit you are rightfully owed this money. Do you think you are the only account wanting to get paid? Hardly, they most likely have dozens of businesses trying to get money out of them. They realize they cannot pay all of them, or else they would go out of business. How do you get your account to rise to the top of the stack and get paid?Most businesses have started using specialized collection agencies, and not the run of the mill agency at that. There are so many specific industries, that a generic collection agency will not be able to communicate with the debtor on a professional level and will most likely not be able to collect. However, if you are able to find an industry specific collection agency, then you will have much better success and will not have to explain your industry to the collection agency.You Get What You Pay ForBy all means, this statement is true in the collection world. There are many agencies that look like they just opened up shop in their basement, and many do. It is not a hard industry to enter, but it is a hard one to survive and succeed in. The barriers to entry are a telephone and bank account, which most people have. The real key is to find a company that has legal experience and can leverage the laws in your favor. Most generic agencies do not have this and will resort to hostile and aggressive threats, which are against the law. And if you are like most businesses, you fear that turning over your account for collections will scare your customer away. That is the last thing that you want to do, but you do want to get paid. It is a tight rope walk to get paid and keep your customer, but there are agencies out there that can do this.What is it worth?A good collection agency will cost you some money, but not as much if you hire a discount firm. The reason being, a discount firm will collect a lower percentage of your accounts and will end up scaring your customers off. A good standard to use when hiring a collection agency is 30%. This is a good rate, and a lot better than losing all of the money when you are unable to secure the funds yourself.Do not waste your time with debt collection. It is better if your business focuses on what it is good at. The opportunity cost of trying to collect the debt is marginal, and will only create headaches for you.Good luck with your debt collection, and know that you are not alone. All businesses have debts to collect. Make sure you get yours collected!

Debt collection is important for all businesses, but it is much more important for small businesses.  A large business or corporation can better weather the ups and downs of economic cycles, because they have more financing options.  A small business on the other hand may not have as many options and one bad debt can send the company into bankruptcy.It is extremely important that small businesses have an action plan for debt collection.  Without a written out plan, you are gambling with your business and its ability to stay out of bankruptcy.  Many businesses could have foregone bankruptcy during the financial crisis with a proper plan of action.How do you decide what is the proper plan of action for collecting your old accounts receivables?  When is the time to start collecting and stop extending the terms?  This can depend on what type of business you have, but a general rule of thumb is the earlier you start, the better your chances of collecting the debt.  Take a look at the chart below to see the chances of collecting versus the age of the debt.As you can see, the earlier you are to act, the better your chances for collecting the account.  The crucial time for debt collection is at 90 days past due.  The percentages drop by almost 25% and the debt becomes very hard to collect.You should do all you can as a company to collect the debt before the 90 day mark, but make sure to turn the debt over for collections before the 90 day mark.  This will allow the collection agency to do their research and act on the debt before it gets to the 6 month time period.  It is very difficult to collect a debt if it goes past 6 months.  Most collection agencies will not waste their time with a debt this old.  It is hard for a collection agency to stay in business, because the odds of collecting are so low.I wish you well in your small business affairs and I hope that you are able to collect all of your bad debts.  If there is one thing that you take from this article, make sure you act sooner than later, your business success might depend on it.