Unpaid receivables pose a severe financial risk for many U.S. businesses. One annual survey reveals that nearly half of all B2B invoices are paid late – and around 6% are eventually written off as bad debt. CFOs keep a constant eye on the metrics that show when weakening receivables are threatening the financial health of their organizations. Many maintain active partnerships with a professional agency who take over troublesome accounts, seeking to collect the largest possible share of back debt for their clients.
Sounds like a good strategy, but the results don’t always match the client company’s goals or expectations. Still, this isn’t always a reflection on the collection agency’s skills. In many cases, the client company’s financial team is unaware of the role they play in the partnership’s success. Collections is a time-sensitive, data-driven business – and staying in sync with your collections team is essential.
Here are 5 ways you can empower your collections agency to recapture more funds for you.
1. Share all relevant data
When referring accounts for collections, always present a clear, complete picture of the case. Most agencies will have an organized intake process, but at minimum, you will need to provide a detailed customer profile with payment terms, credit limits and up-to-date contact information for the staff who have authority to pay or negotiate past-due amounts.
Share the full billing and payment history of the account, including all attempts to resolve past-due amounts. If you’ve had live conversations with the debtor, include all documentation, with details of payment promises made (and subsequently broken).
2. Stay dialed in
After reviewing this information, your collections team will have questions. Waste no time in answering them. Countless cases stall – and in many cases, fail – because missing information created unacceptable delays on the front end.
3. Make timely decisions
Once an offer is presented to you, don’t lose out by bouncing it back and forth among several decision-makers. Deals that sit for weeks or months can easily fall apart, since often you are not the only creditor seeking relief. Adopt a smooth process that supports fast review and approval of every offer your agency brings you.
4. Exercise patience
This might seem to contradict what I’ve just said about speed, but tough nonpayment cases are rarely resolved overnight. Negotiations can be maddeningly complex, based as they are in the debtor’s financial distress and the unique way they are navigating it. Trust your collections partner to work as quickly as possible within the twists and turns of the situation while delivering regular updates so you know where things stand.
5. Be realistic
It can be intensely disappointing to receive an offer that seems low, especially if your company is experiencing significant financial stress. But when you set a deal aside because you dislike the terms, it’s likely to disappear. This does not mean you can’t question a settlement offer. But you will need to listen to the collection agent’s rationale and weigh the value of funds collected now versus going to court.
Due diligence can help you identify a collection agency with proven experience, legal expertise and a strong track record of resolving cases quickly and profitably. Following these best practices in working with them will help maximize the value they deliver for you.
Dean Kaplan is president of The Kaplan Group, a commercial collection agency specializing in large claims and international transactions. With more than 35 years of successful experience in manufacturing, international business leadership and customer service he provides business planning, training and consultation services for a wide range of global companies.
“Past Due” by Damian Gadal is licensed under CC BY 2.0.
