Running a startup can be an overwhelming experience for even the most seasoned business professionals. In almost every case, the founders of a company will eventually have to take on issues that they never imagined they would have to deal with.
It is very rare that someone builds a contingency plan for hiring a debt collector right into their original business plan. In most cases, it is much further down the road when this necessary step becomes apparent, and most startups react too slowly when delinquent accounts start to creep up.
If the thought of hiring a debt collector has already crossed your mind, then you probably should have already done it a while ago. And even if the thought hasn’t occurred to you just yet, that doesn’t mean that you are free to continue burying your head in the sand.
To help you make sure that your startup stays vigilant with respect to any future account receivable issues, let’s take a look at eight signs that you might already need to partner with a business-to-business debt collection agency.
1. Your Customer Goes Off the Grid
One of the most obvious signs that you are going to need to collect business debts is that your customer stops returning phone calls and responding to letters. In many delinquent account cases, customers will appear to have completely fallen off the face of the earth, which obviously makes them hard to work with.
You should also be thinking about hiring a debt collection agency if your customer fails to respond to a demand letter.
In most cases, customers who are difficult to contact are purposely avoiding you, but experienced debt collectors know how to get through to these types of debtors.
2. Your Customer Breaks the Original Agreement
Assuming that you made the effort to document your original agreement when extending credit to a customer, anything that they do to break that agreement is a clear sign that something is wrong. This often takes the form of a failure to make a payment, but it could also be something like a failure to update certain documents or another stipulation that you worked out in the original agreement.
Experienced debt collectors know that any small variance from the original agreement is usually a red flag that a deeper problem exists somewhere.
3. Broken Promises and Partial Payments
Another red flag that you should always be looking out for is any type of broken promises. This typically happens when a customer is working with you to get caught up, but then something happens to send them off course. It can also happen when they run a little short one month and offer to make a partial payment.
Once again, an experienced debt collector will be able to gauge exactly how much rope should be given to a customer so that they can attempt to catch up without hanging themselves.
4. You Don’t Have the Hours to Document Collection Efforts
Proper documentation is essential when it comes to collecting commercial debt, but many startup founders don’t have the time in their days to keep up with documenting their debt collection efforts. This might sound like an obvious sign that help is needed, but it often goes overlooked while putting off the collection effort for a few days turns into putting it off for a few months.
The people at the top of any startup need to put all of their focus into making sure that startup is successful in the long run, and one of the best ways they can free up their time to do just that is to offload tasks like collecting past due accounts to professionals who specialize in documenting the entire process.
5. Your Customer Disputes the Debt
One way that a debt collection scenario can get extremely complicated is for the customer to dispute the validity of the debt. When this happens, the burden of proof rests with the company, which means that you need to have all of the specifics of the debt documented and plenty of time to go over them.
Taking the time to fight a dispute over a debt can consume a huge portion of a founder’s time, so pushing that work off to a debt collector is often well worth the contingency fees that it ends up costing the startup.
6. Things Get Personal or Emotional
When accounts creep into delinquent territory and once-great customers suddenly aren’t so great anymore, it can be very easy for anyone on the other end to take things very personally. However, letting those raw emotions get in the way of settling a debt and moving on is always counterproductive.
If you start to feel like interacting with a debtor is getting too personal or emotional, that is often a perfect time to bring in an agency that can act as a calm, rational buffer between the two parties.
7. When You Feel Overmatched
In some cases, you will realize that you find yourself attempting to recover an outstanding amount owed from someone who is clearly a professional scam artist. In these cases, once you get past the emotional feelings, you will realize that you are dramatically overmatched as this person probably has plenty of experience fighting debt collectors.
Should you find yourself going toe-to-toe with a professional debtor, the best way to fight back is to bring in a professional of your own.
8. Debt is Aging Without Progress
Because many startup founders simply don’t have the time to be bothered with collecting bad accounts, those debts often sit on the back burner for weeks and months at a time.
If you start to notice that your delinquent accounts are aging without much progress, you run the risk of losing any ability to collect down the road because of statutes of limitations. Should you let this go too long, even a professional debt collector won’t be able to help you.
If any of these signs have shown up across any division of your startup, you are doing yourself a disservice by not partnering with a B2B collections lawyer right away. Not only will teaming up with the right agency help you collect on what you are rightly owed, in most cases, it won’t even cost you anything until the debt collector signed to your account comes through for you. So, the only question left to as is, “What are you waiting for?”