Pros and Cons of Sending Clients to Collections

Posted by Ryan Howard on Mar 28, 2022 11:15:15 AM

Pros and Cons of Sending Clients to CollectionsIf you're stalling on the idea of following up on past due invoices, don't fret.  Sometimes it takes a little research to move forward on something that's uncomfortable or unfamiliar. We've pulled together some reasons why you might be hesitant and how to move past those obstacles. 

Here are some pros and cons of sending your clients to collections.

Pro - Following Up Means Getting Paid

Obviously the main reason you'd send a client to collections is to get paid. This is a big pro, right? It means more money in the bank and one less unpaid invoice in your business aging report. More cash flow also means you minimize the risk of getting behind on your own bills and expenses.

Con - The Risk of Losing a Client

If your client isn't paying on time, there's a perception that sending their account to collections means that you'll lose them as a client. In fact, if there's a miscommunication or other misunderstanding, escalating the account to collections may get it cleared up so your client relationship is better. And if the client isn't paying at all, do you really want to keep them as a client?

Pro - Tightening Up Your Credit Policies

Another good reason to send client accounts to collections is to get a clearer picture of how your payment terms and credit policies are working for your business. Credit managers often work with collections to make adjustments to credit applications and payment terms, especially if the client needs more time in between payments.  Tightening up these policies will help your business know which clients to trust and when payments can be expected.COLLECTIONS + BRAND PROTECTION

Con - Damage To Your Brand Reputation

You could be concerned about a third-party collections agency representing your company when attempting to collect on unpaid invoices. Because that's what's happening when a client account is outsourced to professional debt collectors. Debt collections doesn't give anyone a nice feeling in the pit of their stomach so research is necessary. The right agency will put an emphasis on training, research, quality control and respect your brand and your client in the process.

Pro - Focus on the Clients Who Are Paying

When your business escalates an account to collections, it lessens the burden of another task on your to-do list. This means that you can return your focus to your clients who are paying their invoices on time.  Your time is important and valuable. Some things can be outsourced so that you can be there for your other business needs.

Con - Collections Costs Money

Sending a client to collections doesn't have to be a frightening prospect. The right agency will be helpful in the process, trustworthy and experienced with the needs for your industry. The right agency will also be transparent on collections costs and only charge a fee if their collections efforts are successful.  If they are unable to collect on your behalf, you actually owe nothing. Zip, zilch, nada.HOW B2B COLLECTIONS WORKS

Learn more about how B2B collections works or contact Enterprise Recovery if you have more questions or concerns about sending clients to collections.

Topics: Hiring a B2B Collections Agency, Commercial Debt Collection