Some of your common choices at this point are:
- Offer a Payment Plan
- Settle for reduced amount
- Commence litigation
- Write off the debt
- Close the claim
- Monitor the situation
- Collect data to resolve a dispute
- Hire a skip-tracer
- Petition for involuntary bankruptcy
- Change service providers
Your company is making business decisions every day that affect profitability. What to sell. How to sell. What customers to target. Where to purchase materials. How to operate efficiently. How to allocate an advertising budget. Each of these decisions is made better when you collect data, analyze the information and understand your choices. If you apply the same analytical process to unpaid invoices, you would expect to make superior decisions to maximize your profitability. The larger the amount owed, the more impactful the decision.
The fastest way to get paid may be to take a very firm position that you don’t care about the debtor’s situation and just insist on payment. If they don’t cooperate immediately, then commence litigation to show your seriousness. This hard line approach may result in faster payment in some situations, but in situations where the debtor truly does not have the ability to immediately pay in full, going to court may not be the best decision for a variety of reasons.
Unfortunately, the aggressive approach described above frequently results in the debtor dramatically reducing or simply refusing all communication, which means your ability to get information is limited. Limited information will result in not making the optimal decision in many cases. Spending money for litigation when the company is about to go under, file bankruptcy, or is judgment proof is a waste of resources. In other situations, cooperation can often result in payment far faster than the 6 to 24 months it can take simply to get a judgment, and at a much lower cost. But for a collection agency, it is a lot easier to simply demand payment and go to court with their client’s money if that doesn’t work.
The conundrum with debt collection is how to maximize the likelihood of getting as much money as fast as possible without adversely affecting your ability to collect valuable information. This is a delicate balancing act where experience and business knowledge is very helpful. In today’s business climate which is still challenging for many small and mid-size companies, understanding the true situation is critical to making good decisions and maximizing profitability.