Why it makes smart financial sense to outsource your company’s debt collection tasks to a commercial recovery specialist
Trying to collect past due receivables from your business clients is not easy, especially when dealing with organizations that have a reputation for paying late or not paying at all. For most companies, dealing with such business clients can be stressful, time-consuming, and financially damaging. That is why outsourcing your company’s debt collection responsibilities to a reputable commercial debt collection agency is financially a far better solution than trying to manage your debt collection process in-house.
Here are six reasons why it makes good business sense to outsource your company’s debt collection tasks to a commercial collection agency:
What is a Personal Guaranty?
A Personal Guaranty Form is a promise made by an individual guarantor to repay the debt a business owes to another business when buying their products in the event the business purchasing the good becomes unable to pay its debt. A Personal Guaranty Form is the legal document on which the Personal Guaranty is signed. Through a Personal Guaranty, you get the assurance that you will be paid for the goods or services you sell to a business in the event that business has financial problems and can’t pay you.
How to use a Personal Guaranty Form?
To ensure the effectiveness of a Personal Guaranty, it is vital that the Personal Guaranty Form is accurately completed and signed. To ensure accuracy when completing the Personal Guaranty Form, you can use a number of standard formats that provide the guidelines for what information is required for the form to be legally valid. Download our Personal Guaranty Template.
The roles of the parties involved in the Personal Guaranty agreement should also be well-defined. How you define your role and that of the guarantor will determine if the agreement becomes absolute or conditional. An absolute personal guaranty agreement dictates that the guarantor assumes the obligation of repaying the debt of the company if the company cannot pay, for any reason.
On the other hand, a conditional agreement will dictate that the liability of the guarantor to repay the debt the business owes you is dependent on a particular event, in addition to the business’ default. Make your free Guaranty Agreement.
How to Get the CEO/Owner of a business to sign the Personal Guaranty Agreement
Most businesses become incorporated so they are independent entities, and the owner of the business cannot be held personally responsible for the business’s debts or legal problems. Business owners always want to separate themselves from their business for legal and financial protection. Therefore, getting the owner or CEO of a business to complete and sign a Personal Guaranty Form is not easy. For this reason, you will need to use a few strategies that will ensure the CEO or owner (the guarantor) of the business completes and signs the form.
Hiring a commercial debt collection agency to collect your past due receivables is the safest and most effective way to avoid non payment from your business clients. Once you have hired a reputable debt collection agency, the weight of collecting your past due receivables is taken off your shoulders, allowing your team to focus on other activities that will increase your company’s productivity and sales.
Commercial collection agencies excel at collecting past due receivables. That is because their main business function and area of expertise is collecting past due receivables in a timely and efficient manner. Therefore, issues such as late payments and non payments are significantly reduced as a debt collection agency will focus on monitoring and collecting your receivables. Outsourcing the monitoring and collection of your past due receivables to a debt collection agency will enable you to delegate this very sensitive and stressful work to people who are experts at managing it and producing positive results.
Maintain Good Relations With Your Clients
All clients are important. Outsourcing your debt collection responsibilities to a commercial debt collection agency will not only maintain your relationship with your clients, but it will also relieve you of the stressful task of reminding your clients that they owe you money, which is never an enjoyable conversation.
A debt collection agency will perform the tasks of notifying, monitoring, and collecting debts on behalf of your business. This eliminates the need for your internal staff to remind your clients of the debt they owe you, because the collection agency will do that for you.
Efficient debt collection agencies employ highly trained collection specialists who are fully aware of the need to maintain healthy working relations between your company and your clients. More importantly, outsourcing your collection tasks to a debt collection agency will give you the benefit of improved relations between your organization and clients as you are not the “bad guy” who is chasing them down for payment.
To keep your clients from defaulting on the money they owe you, a commercial collection agency will send timely reminders to your to late paying clients in the form of notifications that prepare and remind them when to pay, how to pay, and the repercussions of not paying. This creates a healthy relationship with your clients as they will not be caught off-guard when the debt collection period arrives.
Timely Collections Create Better Cash Flow
Some organizations that try to collect past due receivables internally fail to collect the money that is owed to them in a timely manner because they are caught up in other tasks, or they avoid performing their debt collection responsibilities because of the stress involved. The inability to collect income from past due receivables can have a very negative impact on a business because it denies a company the cash flow it needs to operate.
Outsourcing your collection responsibilities to a commercial collection agency will help regulate your company’s cash flow by ensuring that the rate of defaults are significantly reduced.
How do collection agencies do this? They maintain a strict monitoring protocol of your receivables. They represent your company by keeping track of all due dates, penalties, and overhead charges that are payable to you by your clients. Therefore, in the event a client requires more time to pay the money they owe you, the collection agency will notify you in advance and communicate to the debtor on your decision and the possible penalties for delayed payment. Furthermore, the debt collection agency will represent you in negotiations and set new dates for debt collection that fit with your organization’s schedule.
Reduced Debt Collection Time and Cost
The process of trying to perform debt collection internally at your company can prove to be expensive and very stressful due to the need to train employees on legal debt recovery collection techniques. It can also negatively effect the productivity and performance of your employees who handle debt collection because of the high stress involved. This is why companies are eliminating their internal debt collection departments and outsourcing their debt collection needs to professional debt collection agencies.
Professional debt collection agencies employ specialists who are comfortable making collection calls and talking to businesses about the debts that they owe. They know all the rules and regulations involved in debt collection in your state. This helps to create shorter debt collection cycles, which reduces the time spent on collection activities. When you take into account the cost of hiring, training, and paying employees to perform debt collection, the cost of performing collection tasks in house is often far more than it is to outsource that work to a collection agency. Also, a commercial debt collection agency will always be able to collect a higher percentage of your past due receivables, and do it faster, increasing your cash flow far more than you would experience with internal employees managing collections.
Better and More Efficient Debt Collection Plans
Some businesses hurt their debt collection process by failing to create a collection plan and give it the seriousness it deserves. This is one of the main reasons for clients not paying on time or not paying at all. This is why it is important to have a formal collection process in place where your past due receivables are automatically sent to your collection agency, and that you clearly state this fact in the payment terms and conditions section of your proposals, contracts, and invoices.
When a client sees that you are serious with your payment terms and conditions, they are much more likely to uphold their end of the sales agreement and pay you on time, especially if you state that all past due receivables are automatically sent to a commercial collection agency.
Outsourcing your collection needs to a commercial collection agency will enable your firm to benefit from a professionally scheduled debt collection plan. A debt collection plan with regular reminders being sent to late paying clients is important in the collection of debts as it helps keep debtors informed that they are late paying their debt to you and legal action may be forthcoming if they don’t pay you. This eases the process of debt collection and also keeps the entire collection process professional by limiting defaulter excuses.
Better Financial Outcomes
When selling products or services to other businesses, payment credit terms are often requested by the company that is making the purchase. This may be 50 percent payment upfront and the remainder due upon delivery, or net 30 days, 60 days, or 90 days. When offering payment credit to a business that wants to buy your products or services. you are putting your company at risk, especially if the sale of goods is very large.
You can help offset this financial risk by outsourcing the collection of these potentially very large debts owed to your business by partnering with a commercial collection agency. Often, the collection agency you partner with will be able to research the client you are considering selling your goods to in order to determine the credit worthiness of that client–if they have good business credit and pay on time or if they are notoriously late paying their debts and even in if they are in default and being sued for not paying their debts. The collection agency can also work with you to create a collection plan of how to handle collecting money from that client if that client decides not to pay on time or not pay at all.
By partnering with a collection agency, you help reduce the risk of working with new clients and selling on credit.
When past due receivables are allowed to go on unchecked, they can hurt the cash flow of a business and even lead to closure due to unprofitable operations. Outsourcing debt collection operations helps to keep businesses alive by preventing the occurrence of bad debts, dysfunctional business relationships, and time wastage on payment re-negotiations.
It is less costly and a better return on investment to hire a commercial collection agency than risk taking massive losses from non paying clients. Remove the stress and financial risk of trying to perform collections in house and instead outsource your collections to a commercial collection agency and streamline the operations of your business.
Do you have a business client that is more than 90 days late paying you?
If YES, we can collect the money that is owed to you.
As a professional commercial debt collection agency located in Frisco, TX, Melton Norcross and Associates specializes in helping businesses collect past-due receivables.