The Various Ways in Which a Collection Agency Can Help You Collect Payments from Non Paying Customers
If you run a business then you can tell how frustrating it is when it comes to chasing payments from customers who do not want to, or are unable to pay. The key to the successful, legal collection of debts include preparation of credit application form, and a policies and procedures manual.
While a collection agency will truly help increase the collection of overdue accounts receivables, the best method of collecting debts is having a measured approach. The various consumer credit laws in Canada affect the preliminary methods of debt collection because they are more inclined towards protecting the consumer. There are also laws that restrict the rate or amount of interest which can be charged on the accounts that are long overdue.
As the owner of business, you must undetsnad aging of accounts payables and accounts receivables and the golden rule in this regard is that if an account goes for long period of time unpaid then its collection becomes more difficult. Generally, some accounts will take longer to pay than others. For example, the accounts owed by Canadian or U.S. federal government normally take between 60 and 90 days to get paid. Medical accounts also take considerably longer period of time to get paid than the others, depending on the insurance type held by the patient.
Even a collection agency will have to wait or make a call so as to check your account’s status before making a decision to instigate the process of collection. In many small businesses in Canada, there is no independent collection department, and this makes collection of accounts receivables challenging. It is the accounts receivable clerk in these small businesses who is tasked with the role of collecting overdue accounts receivables, while at the same time they have to undertake their day today responsibilities and tasks of balancing business accounts, making and receiving payments, issuing invoices, etc.
Because there is no collection department that deals with the checking of overdue accounts and following them up, it only thrives on the believe that customers will pay in time. Unless its money owed by the Canadian government, or some certain medical claims, no account should be unpaid after do days from the time when it became due. By the time its 120 days due, the person responsible for the collection of accounts receivable should take the necessary action to ensure that the accounts get paid up. Notices should be sent in intervals of 30 days, reminding the customer that accounts are overdue and payment should be made as quickly as possible.
At the same time, phone calls should also be made, so as to try to talk to the responsible person such as managers or owners of business, and inform that accounts are long overdue and there is need for them to make payments urgently and settle them. If there is no response, then the following options can be taken.
(i) Sending out pre-collection notice with options
(ii) Hiring collection agency to do it
(iii) Instituting case in court.
While some businesses would choose option I, it will cost them a lot of time and effort to follow up payments, and that may interfere with the normal operations of business. The second option of hiring collection agency is the most convenient because it has higher of recovery rate and will let you concentrate on the management of your business while the collection agency chases payments from non-paying customers.