Cash flow and revenue are critical for the long-term health of a business. Unpaid invoices can create troubling financial situations where your company has trouble meeting basic expenses. To collect debts, some businesses hire a collection agency to collect their money. So how do you know when it’s time to consider the collection process? Here are some warning signs of debt problems for businesses that suggest it’s time to do more than make follow-up collection calls.
Warning Signs of Financial Trouble
Sending someone to collections is a challenging decision for a business. However, recognizing the warning signs of financial trouble can help simplify the issue. Here are some red flags to look for before sending a client to collections:
The Client Stops Returning Phone Calls
A client avoiding contact is one of the biggest warning signs of debt problems. Whether it’s gradual or sudden, a lack of responses can indicate the account is avoiding you. While extenuating circumstances can lead to reduced communication, it’s more like they’re simply trying to avoid you.
Is a client telling you that the dog ate their homework? Conjuring up bizarre excuses in attempts to explain why they haven’t paid is another warning sign of financial trouble. Often clients will attempt to delay paying you by offering vague reasons like email or system troubles. Paying attention to their explanations and asking detailed questions can help determine if they’re trying to avoid paying what they owe.
Hearing contingent promises about landing a major account and upcoming paydays is another warning sign of debt problems. This can indicate that the client is dealing with significant cash flow problems and lacks the capital to pay their bills. It’s also a possible sign that you aren’t the only company waiting for payment.
How to Handle Sending an Account to Collections
Sending an account to collections is an unpleasant decision because it creates stress for the business and can strain relationships with the client. However, there are ways to professionally handle this difficult financial situation. Here are some tips to consider the next time you send a client to collections:
Call the Debtor
Making a collection call to the debtor serves as a helpful reminder to the client that they owe you money and that you’re considering further action. Maintaining a healthy relationship with the business is important, so keep this phone call friendly but firm and avoid any threatening or hurtful language.
Mail Debt Collection Letters
If the client continues to avoid paying their debt and shows other warning signs of debt problems, consider sending a demand letter. The first letter’s tone should be similar to the phone calls, but additional correspondence can include your intention to retain a debt collection agency or threaten legal action.
Send Revised Invoices
Resending invoices that detail the outstanding debt and include late fees can often lead to the desired effect. Be sure to alert the client about possible next steps if they continue to avoid making the minimum payment.
Make a Settlement Offer
Before sending a client to collections, consider making one final settlement offer. Sometimes ending the dispute with a payout can resolve the issue and maintain a working relationship.
Retain a Debt Collection Agency
If the debt problem remains after phone calls, letters, and settlement offers, it’s time to consult a credit counseling agency. When deciding which agency to work with, make sure they have a solid rating with the Better Business Bureau.
Also, take time to ask about their collection process. While the ultimate goal is receiving the payment, you also want to try and salvage the professional relationship with your client. An agency that utilizes aggressive tactics may permanently strain the partnership.
Are You Seeing Some Warning Signs of Debt Problems With Your Clients?
Acting quickly is critical for closing unpaid invoices. Contact Rapid Collections today to learn more about our debt collection process.
Why Contact Rapid Collections When It’s Time to Send an Account to Collections?
Sometimes sending a client to collections is inevitable. When the time comes, partnering with the right collection agency is critical. The Rapid Collections team takes pride in managing all elements of the collection process. We enjoy exceeding our client’s expectations and aim to develop long-term relationships to become true partners by offering the following advantages:
We understand that each client has unique needs and offer a professional process that focuses on maintaining a professional relationship between you and your debtor. Our in-house collection specialist team adheres to all federal and state laws.
Our team strives to reach an amicable solution between our clients and the debtor. We analyze all contractual documents to verify your unpaid invoices are resolved.
Our agents are experts in the debt collection industry and thoroughly review and discuss any concerns before reaching out to your debtor. We understand that the client is in full control and makes the final decision throughout the process.
Rapid Collections: An Industry-Leading Debt Collection Agency
Rapid Collections is a leading provider of debt recovery services. Our team takes pride in helping businesses secure revenue and implement a system that protects your company from delinquent clients. As a full-service collection agency, we offer a variety of solutions, including:
We aim to settle cases, but sometimes legal representation is necessary. Rapid Collection’s litigation team has years of experience and leverages their knowledge to prepare a detailed case that enables you to collect your debt.
Our team offers consulting and training services that give you the resources to catch warning signs of debt problems. We’ll show you the best practices to streamline processes and avoid the issues associated with unpaid debts. If you’re starting to notice some warning signs of debt problems from clients, contact Rapid Collections, and our team will help you resolve unpaid invoices.