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How to Avoid Using a Commercial Collection Agency

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5 things that you can do to encourage customers to pay on time

It doesn’t matter what type of business you own, odds are you will one day face the problems associated with delinquent payers and debt collection. Sometimes it will be a case of oversight on the customer’s part, other times it will be due to willfully and actively avoiding their payment.

Although there are plenty of tips and strategies for proceeding with debt collection, below are five steps you can take to encourage your clients or customers to pay on time and avoid using a commercial Collection Agency

How to Avoid Using a Commercial Collection Agency

1. Credit Check – Although credit checks can be expensive and sometimes time-consuming, nothing could be more important when it comes to avoiding the hassle of a delinquent customer or client–especially in the case of a significant debt. Small transactions are rather pointless for you to run a credit check, they simply aren’t worth the expense or the time invested. However, if the agreement you are entering into is creating a long-term relationship and/or is a considerable amount of revenue that could impact your bottom line, run a credit check. Although not a guarantee of payment, running a credit check can help you avoid using a commercial collection agency to track down those problem clients and delinquent accounts in the future.

2. Checking References. Although readily asked for when applying for a job or renting an apartment, reference checks are often overlooked as a reliable means of determining the risk of a customer or client. Contact their past business partners/relationships to see whether or not their experiences with the risk were positive and whether or not they paid on time. Although it may seem counter-intuitive, invite them to do the same with you.

3. Put it in writing. Putting the terms of your payment arrangement in wiring, including due dates and the amounts owed, is a must. By clearly communicating your terms in writing and having your clients/customers agree to those terms, you ensure your risk against delinquent accounts and help avoid using a commercial collection agency.

4. Accept credit cards. Though not a perfect fit for every business type or transaction, they can be very helpful when a customer/client owes you a large sum of money. By accepting payment via credit card, you shift the burden of debt collection onto a third party, namely the credit card company. The small fee you will pay per transaction is a small price to pay compared to hiring an attorney or commercial collection agency. By accepting credit cards, you can focus on what you’re good at, running your business, and let MasterCard and Visa deal with the collections.

5. Make contact. One of the easiest ways to avoid using a commercial collection agency is to simply make polite and cordial contact with the debtor. It’s entirely possible the customer/client simply overlooked their payment. In this case, a friendly reminder phone call will often do the trick.

A simple phone call, email, or letter on your company’s letterhead notifying them of their late payment simply stating something along the lines of ͞Have you overlooked this?͟ is often times the very best way to begin the collection process.

The fact remains, no matter the steps you take, no matter how diligent you are or the care you take in assessing the risk, you will end up with a delinquent account. However, by following the items outlined above you can reduce your future problems dealing with debt collection and avoid using a commercial collection agency.

The above article contains general legal information and does not offer any legal advice. The law is complex, varies from state to state, and changes often. When it comes to legal advice always contact a licensed lawyer.