Essential in Tough Economy to Recover Debt and Keep Good Customer

Collecting debt is a long and arduous process. In August 2009, Wall Street Journal reported that companies with less than $500 million in sales were taking 58.9 days to collect money owed to them, up from 54.4 days in 2008. Larger businesses fared much better at 41 days, down from 41.9 days in 2008. Though this increase is alarming, it could have been much worse considering the present economic slowdown.

Pressure on small businesses

If you are a small business, it is double whammy for you. You sales have probably dropped in this economy and you are having a hard time collecting payments for the sales you make. On top of that, your buyers know that business is not good so they are probably demanding better deals, promotions or lower prices to continue to buy from you. To add to your difficulties even the credit has dried up and it is tough to get any loans. Without resources to buy raw material or pay your bills, your small business runs the risk of shut down or bankruptcy.

Protecting customer relationships


Delinquent customers hurt every business, big or small. Recovering debt from non-paying or slow-paying customers is an arduous and delicate task. Good customer relationships are vital to business growth. Businesses avoid risking their customer relations by following up on payments too aggressively.

Hire a collection agency to cut losses

It is less expensive to retain existing customers than Non Profit Growth acquire new ones. Incentives such as lower prices, credit, promotions and new schemes help in retaining existing customers when the market is very competitive. However, companies also need to cut their losses by reducing delay in payments.

Collection agencies collect debt for companies. Hiring a collection agency has many advantages:


  • The business enjoys good customer relationships as the collection of debt is handled by an external agency.
  • As the collection of debt is outsourced, the company can solely concentrate on business growth.
  • Collection agencies are cost-effective as they are only paid a percentage of the debt they recover.
  • The earlier a collection agency is employed to collect debt, the larger and faster will be the collection. In the longer run, collection agencies are more effective in collecting debt than in-house company representatives.

Sell debt to debt purchasers


Debt purchasing agencies are an option when the business is in urgent need of funds. On selling the debt to the debt purchaser, businesses receive payment immediately and pass on the job of collecting debt to the purchasing agency. However, the rate at which the debt is purchased is quite low. Debt purchasers make a profit by recovering more money from the debtor than the amount they have paid for it.

Businesses have the option of hiring a collection agency or selling the debt to recover payments. Debt purchasers are selected when funds are required immediately. Either way, companies can continue doing business with the customers without ruining their relationship.

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