Small businesses are normally run on tight budgets with thin profit margins. The successful business owner spends time doing everything possible to increase profits without bringing on more expenses. When a small business has outstanding invoices that have not been paid on time, the money owed can eat into the company’s profit.
One of the reasons small businesses avoid hiring collections agencies is because they don’t feel they can justify the costs. But after hearing weeks and months of excuses from customers as to why they cannot pay and seeing the lost revenue from those invoices diluting company profits, it becomes obvious that hiring an agency is a profit recovery process that will enhance cash flow and pay for itself several times over.
Your company needs to get paid if you are going to show a profit.
Worth the Investment
According to Fox Business, professional agencies recovered around $51 billion for clients in 2007 (the last date where this information is available) and only kept $11 billion in commissions. This means that hiring an agency can net you a return of $4 for every $5 recovered. Any business owner looking at profit recovery methods can tell you that getting 80 percent of the money that you thought you would never actually collect is like falling into a gold mine.
But Why Hire a Collections Agency at All?
Entrepreneur Magazine reminds us that holding onto old accounts that refuse to pay is expensive. Once an account goes beyond the 30-day point, it starts to cost your company money to hold onto that invoice. Without enough money coming in you may find it difficult to pay for routine business expenses. At some point, you need to collect on that invoice to stop the financial bleeding.
The simple truth is that your business does not have the time or resources to collect on every outstanding invoice. If you can recover 80 percent of whatever that debt is worth by hiring a collections agency, then you are way ahead of the game. You can sustain your cash flow when you hire a collections agency, and you can make sure that your company avoids taking on more costly debt. Agencies have the experience and tools necessary to collect on your debts.
Hiring a collections agency can help your company to increase its profits.
When to Hire an Agency
Many businesses often miss out on profit recovery opportunities because they do not understand the economics behind bringing in experts. A collections agency can help you to recover your outstanding invoices, and your investment in the services of an agency is only 20 percent of what is recovered, on average. When you have the chance to recover any portion of money you were prepared to write off as lost, then that has to be considered a good business investment.
The longer you wait to bring in a collections agency, the less money you will recover on each invoice. The costs of holding invoices make them less valuable, and waiting for months before bringing in help will cost you even more money.
Don’t wait. If you have existing customers that routinely violate payment plans you have set up with them, then it is time to bring in an expert. Collections services can also be helpful when new customers do not respond to your attempts to collect on a late invoice. Contact us to learn how we can help your business recover more money.
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