Debt collections may not be the most enjoyable part of back office operations, but it's absolutely necessary. Unfortunately, some of your business clients will miss a payment or more due to various reasons. If you've signed an agreement and fulfilled your part, they still owe you.
What happens when business debt goes to collections?
Why Does Business Debt Go to Collections?
Whether your business is freelance, consulting, software-as-a-service, or any other type of company that works with other companies, those types of relationships are referred to as business-to-business or B2B. B2B debt collection is vastly different from collecting from individual consumers but just as important. Some of the reasons other companies may neglect to pay you include:
- Misplaced or missed invoice
- Unclear payment terms
- Expired or maxed credit options
- Internal challenges such as bankruptcy, mergers or closed business
- They're unhappy with your goods or services
Some of these can be resolved through a phone call or demand letter. Others may need to be escalated.
When is Business Debt Escalated to a Collections Agency?
It's not uncommon for your business to attempt to resolve the unpaid debt before escalation. As mentioned, some past-due debts may be due to a misunderstanding. When your business client is non-responsive to your calls or notices, unwilling to work out any disputes, and unwilling to pay, then escalation to a third-party collections agency may be your next step of recourse. Another reason to escalate is when the payment is 45-120 days past due, depending on your accounts receivable collections policy.
What Should I Expect from a Debt Collections Agency?
Your choice of collections agency should protect your brand's reputation during the collections process. They should employ collections specialists that are trained in the art of recovery with negotiation skills and industry knowledge. They will have access to professional tools such as specialized software, skip tracing, and investigative resources to recover payments owed to your business. And they should only charge fees contingent on the recovered payments.
You won't owe anything if the business debt collection efforts aren't successful.
If you are concerned about sending a client to collections, please contact us, and let's talk about it. Our business is here to support your business-to-business debt collection needs!