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Commercial Collections: Business Finance Booster Shot
Commercial collections: fixture of the new B2B culture
If you're in the business-to-business field, or even if you're
a consumer products business that works through third-party
distribution channels, you probably know what it's like to check
your mail anxiously each day, sifting through all the bills for
that payment that was supposed to have been in months ago.
It wasn't supposed to be like this. If you were a good, honest
businessperson who dealt with other good, honest businesspeople,
"commercial collections" wasn't supposed to be part of your
vocabulary.
Back in the good old days, an invoice or purchase order that
had an established company listed in the "bill to" field was
almost as good as a cashier's check. Nowadays, if you're in the
business of serving other businesses you may find that your cash
flow is less reliable than a small-time bookie's.
Commercial Collections: A Personal Story
This past April I finally got the $2,000 a client owed me for
work done in December, after spending almost as much money's
worth of my time reminding them to pay.
No, this wasn't one of those hand-shake deals-we had a 5-page
contract specifying net-30 payment terms. Nor was this some guy
with a lemonade stand. It was the media division of one of the
largest retailers in the United States.
The worst part was, I trusted this client based on my
experience working with them a few years before. I actually spent
the money on Christmas presents, fully expecting the payment to
come in before my credit card statement.
Avoiding Outstanding Invoices
Of course, you can nip this problem in the bud by cultivating
strong relationships with clients who pay on time. But those
clients are getting few and far between-and, as I found, the good
can go pretty bad pretty fast.
Worse, it seems that the larger the business, the less likely
they are to pay on time. "Net 10 days" might as well be a foreign
language in Fortune 500 land. The long-standing advice given to
B2B businesses and self-employed people is that the money is in
big corporations. But good luck getting it from them before your
rent is due.
What I Should Have Done
Looking back on my experience with the deadbeat corporate
client, my biggest mistake was doing it all myself, with writing
the letters and making the phone calls. With an hourly rate of
about $75, I ended up spending the time equivalent of a large
chunk of my $2000 fee. I should have gone to a collection agency.
I just didn't know then that were collection agencies that would
take on small business debts and run the whole process for you
for as little as $20 per debt.
Of course, I also didn't know that going to a collection
agency didn't necessarily mean "putting an account in
collections." Many collection agencies are in fact refashioning
themselves as "accounts receivable management" specialists;
they'll even manage your invoicing from end-to-end if you want.
The client may not even realizing that the person on the phone is
from an outside agency and not your own personal assistant.
When I think of all the value of the time I spent collecting
that last $2,000, I could kick myself for not handing it over to
a collection agency. But, I can always look forward to putting
this knowledge into practice the next time I have a client who's
slow in paying.
Steve Austin is a regular contributor to Let No Debt Remain
Outstanding (http://www.let-no-debt-remain-outstanding.com/),
a website with articles on choosing a collection
agency, along with recommended the best collection
agencies.
MORE RESOURCES:
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