Late payment and the risk of debt default are constant worries for small businesses. Cash flow can be severely affected, impacting the financial stability of your business. However, when you’re busy running an SME, other pressures and priorities can easily take precedence over robust debt chasing.
Many small business owners worry that putting overdue debts in the hands of a professional debt collection agency (DCA) is a step too far. There are common misconceptions about how debt collection works and it’s natural to be concerned that it may not be the right way to go for a small business. Let’s look at these in more detail:
Professional debt collection is too costly
This is a very common misconception. A reputable debt collection agency will clearly outline their fees as part of the process, and will only ever take action with your full understanding and agreement. Getting a substantial proportion of what you’re owed is much better than writing the debt off completely.
Professional debt collection services are only for big companies
Every business, however small, needs to protect cash flow and profitability by ensuring customers pay their bills. In fact, it could be argued that efficient debt collection is even more important for SMEs because they’re most likely to be severely impacted by cash flow issues.
Using a DCA can benefit all types and sizes of businesses, including sole traders, partnerships and companies with smaller turnover and resources. Many SMEs rely on the services of professional debt collection agencies, not just to chase overdue debts, but also to handle day-to-day debt management, including credit control.
It only works for large amounts
It’s true that occasional late payments for relatively small sums may not warrant third party involvement. But remember, small amounts of debt can add up over time and persistent late payers can have a serious impact on your cashflow.
Unfortunately, some persistent late payers may also be valuable customers. A good DCA will be able to chase them tenaciously but tactfully, without risking damage to the trading relationship.
Large corporations won’t play ball
Don’t worry, this won’t deter a good debt collection agency. They’ll have seen it all and will be experienced in overcoming any barriers. In many cases, late payment by big corporations is unintentional, rather than being a financial policy or cynically done. It may simply be a matter of being persistent and making contact with the right person within the finance team.
When you’re dealing with big companies, it’s important to have all the right paperwork, including agreed credit terms in writing and official purchase orders for each job. A debt collection agency can offer you insightful advice and support to ensure you put robust admin procedures in place and reduce the risk of late payment.
A trustworthy partner
At Redwood we’re experts in debt collection and we have extensive experience working with SMEs. We can deliver the reliable, cost-effective support you need. You can also be reassured that we’ll always represent you with integrity, sensitivity and professionalism. Working together, we can help your business to Grow Stronger.
