When operating a business, the thought of chasing customers to collect the money your business is owed probably isn’t the first thought on your mind; that is until your receivables start to accrue day by day and month by month. At Schiff Debt Recovery Group, we’re here to provide solutions to collect your unpaid invoices. Not getting paid for services performed or products sold can severely affect your cash flow. Whether this is a one-time issue or an ongoing occurrence, you need to be aware of how to handle these situations and when it’s time to place your uncollectible debt with our office.
Businesses need to be firm about receiving payments from a customer. Rather than hoping for the best-case scenario, the decision maker at the company needs to act promptly on excuses so they can collect their money.
When business owners or decision makers are trying to decipher between the correct time to place an account with a debt collector versus holding on to it because they think they’ll recover the funds themselves, they need to ask themselves the following; how old is the account and is the debtor going to pay us? Aging receivables will always be a problem. Correcting the issue starts with your internal team reviewing their aging report. What does it look like? Numbers should be getting smaller as each 30-day window passes. The earlier you place an account, the quicker and higher chances of recovering the balance in full.
Now let’s move to the second question; are they going to pay us? If you knew, you’d have your problem solved without us, but chances are, you don’t know. We’re here to uncover the issues, work the accounts appropriately, and get the accounts collected in full.
Below are several examples of what we call the “runaround”:
- My boss is out of town, but he will be back next week. We’ll be sure to make the payment upon his return.
- It is my busiest time of the year; I’ll be sure to get you paid when I can get to it.
- We put the check in the mail.
- We don’t have the money to pay.
I’ve personally seen the runaround occur too often when these debtors are trying to avoid payment. If they have not stated that they are going to dispute it, this is another way of saying they are not going to pay it.
How To Fix This?
Look into a debt collection agency. See if their objectives align with your own.
I understand the hesitation from the business owner’s perspective about not contacting a debt collection agency. They don’t want to give away a percentage of the payment. If there is a $10,000 invoice, our company could charge about 25% (rate typically lower; this is for example only). The mindset of the business owner is, “I don’t want $7,500, I want the entire $10,000.” Another thought going through the business owner’s head may be, “I’ve collected a debt that was 3+ months old before. Why would I place with SDRG?”
My answer is simple: Sure, you may collect some old debts from time to time. But I’d say the odds are heavily against you once an invoice goes unpaid for more than 60 days. Placing accounts with us is supposed to help correct this issue of writing off a lot of bad debt at the end of the year. Overall, after one quarter of using our services, you should see a difference in your receivables and revenue generated from us.
If you are the business owner, you need to ask yourself the questions below. It is important that you realize that for each day you are not getting paid for your services performed or products sold, the chances of collecting that money decreases rapidly:
- Less than 30 days (within the normal Net 30) = 90%-95%
- 30-59 days = 70%-90%
- 60-89 days = 60%-80%
- 90-120 days (rapid decline) = 15%-50%
Questions to Ask Yourself
- Have you received the runaround?
- Have they been in debt with us before?
- Are they not returning calls?
- Is it 15 days past the original terms of the invoice?
If your business sends out a Net 30 invoice, on the 31st day, you should follow-up to get a status on the payment. If you receive the runaround, that’s when you will need to put on your investigative hat. By the 35th day, if they still haven’t given a concrete answer on when the payment is arriving and how it will be paid, you should start talking to us.
If you wait as long as 60 or 90 days, your chances of recovering this debt (liquidity rate) profoundly decline. Between 30-60 days, typically, you have a 70%-90% chance of recovering. If you wait 90-120 days, the percentage drops as low as 15%.
An issue I’ve seen, which has a drastic effect on the liquidity rate is, placing one large annual batch of claims for collections. As described above, if claims are past the 120-day delinquent mark, we likely will not be recovering as much as we can at the 30-60 day mark.
We at Schiff Debt Recovery Group will review your current in-house process. Next, we will discuss ways to improve your process. We will show you ways to detect the “runaround.” Finally, our company will implement an in-house process that is very simple to follow. At this point, our client should start to see a higher return.