Why don’t people pay?
Before coming to a debt collection agency most creditors are left confused and frustrated when their debtors refuse to pay them. This realization and sense of betrayal can dominate a creditor’s thoughts and adversely affect their on-going business. Of course, no creditor, regardless of industry, is immune from this experience.
Unpaid debt can not only frustrate a creditor, but it can disrupt on-going business operations. Every company relies on its receivables as their life-blood. When the payment cycle is broken, decisive steps need to be taken to protect that life-blood.
As a commercial debt collection agency, we have a great deal of experience in understanding why people (any entity, individual or business, who owes money) do not pay their bills. Understanding some of the reasons for non-payment can only help a creditor establish proper credit policy in advance as well as react decisively and effectively when faced with a delinquent debt.
Fortunately, not every debtor has malicious intentions or predatory motives. The most common scenario we experience as a commercial debt collection agency is when a debtor simply has cash flow issues. In this scenario, a debtor intends to pay their bill, but simply lacks the means to pay most or all of the balance immediately. These debtors are willing to pay, but they have to scramble to generate their own receivables and keep the gears of their own operation moving forward. In this scenario, our job as a commercial debt collection agency is to create the sense of urgency that’s needed to make payment of our client’s particular account their first priority.
One reason it is important to use an experienced commercial debt collection agency is so they can accurately determine the intentions of the debtor and act in the best interest of the creditor.
Unfortunately, as an experienced commercial debt collection agency we see other motivations at play as well. Essentially, the spectrum of debtor motivations range from intending to pay to intentionally not paying. As a commercial debt collection agency, our experience clearly shows that, with regard to debt, the bell curve of appreciation flattens immediately after money is borrowed, services are rendered, or product is delivered.
Not only is there a sharp drop in the bell curve of appreciation, but, whereas a debtor normally feels initial embarrassment when they find themselves unable to pay, many debtors skip that step and immediately jump to justifying non-payment and acting aggressively toward the creditor. These debtors even go so far as to feel victimized by their creditor because the creditor demanded payment when payment was due. They feel they are harshly treated because they continue to be asked to pay their balance or that the creditor is insensitive to their need for more time and understanding.
Some debtors initiate transactions with an eye toward identifying and documenting even the smallest imperfections in the transaction to later justify not paying at all. These predatory debtors are usually the same people who express to us, the commercial debt collection agency hired to collect from them, a deep sense of victimization. In fact, they often express outrage that the creditor has wronged them in one way or another.
Many debtors demand credit terms with the advanced intention to use the creditor as a bank. In other words, they play the float game. Of course, the goal of this game is to stall payment to the creditor as long as possible, allowing them to use the creditor’s capital to finance their business operations, usually interest-free. Many debtors are expert at playing this game. In the commercial debt collection agency industry, we see that the terms of this game are sometimes well-established internal corporate finance strategies. In other words, many debtors, as a matter of policy or predetermined strategy, know in advance that if a creditor extends credit to them that they will not pay their debtor until a specific number or days have passed or until specific steps have been taken against them to force them to pay. Sometimes, their internal policy is to simply never pay regardless of what action is taken against them.
These debtors know that if they don’t pay ten of their creditors, maybe only one of those creditors will actually take legal action to force them to pay. In this scenario, they ultimately pay the one creditor that sues them and they successfully cheat the other nine out of their money.
Given our experience as a bad debt collection agency these debtors do not think about the unethical and immoral aspects of these policies, instead they consider their dishonesty a virtue in the sense that they consider themselves savvy business people.
A creditor needs an effective strategy to deal with the strategies employed by the debtors they do business with. A significant part of this strategy must be to have an experienced commercial debt collection agency on their side to help them deal with these challenges.