Benefits of Collection Agencies for Small Businesses

Hi,
Small businesses have two distinct disadvantages over large corporations in that they usually have no credit or collection departments. This results in accounts receivable with no one available to monitor or resolve them. The business owner is generally busy with other tasks, and his or her small staff is usually strictly clerical. Many times credit is extended due to familiarity with the customer rather than by the approval of pertinent credit information. These factors contribute to small businesses having an higher than average collection problem with their accounts receivable. The business owner fears that customers will be driven away if their delinquent accounts are pursued. It is not uncommon for business owners to have tens of thousands of dollars in very delinquent accounts. Another collection problem for small businesses may still be NSF checks, as they may not have the electronic system in place for point of sale verification. Because small businesses lack the staff to effectively collect on NSF checks, it's imperative that they utilize a third party collection system as soon as possible. In most instances, a collection agency is a perfect fit for a small business. Years ago I had a friend who was a salesman for a collection agency. He told me the story of a small business owner who had a shoe box with dust on it full of NSF checks. It took many, many visits before the salesman was able to convince the owner to give up the shoe box. When he finally did, it contained over 120 NSF checks, some over three years old. Within two weeks, the collection agency had collected over $6,000. of the checks for the business. This is one example of many in which accounts receivable or NSF checks gathering dust are not putting any dollars back into the business. In dealing with NSF checks in particular, the chances of recovery diminish with each passing month. As a small business owner, it is always important to remember that you are entitled to be paid for your goods and services provided to your customers. When you have the need of utilizing outside collection services on your accounts you are exercising your rights as a businessperson. Tomorrow, I'll talk about NSF checks.
Until then,
Alan