More SMEs Are Using Collection Agencies

Which is no surprise, I suppose. It is, though, disappointing to me personally that SME’s are not trying harder to negotiate and resolve problems without recourse to third parties.

Debt Collection Agencies obviously have a purpose – they wouldn’t exist if they did not. Obviously, too, there has to be an end to the line somewhere when it comes to truly recalcitrant non-paying customers. However, dividing the recalcitrant from the willing but temporarily unable is the task of the supplier – you, actually! - and it’s very important indeed both to you and to your business that you differentiate between the truly recalcitrant and the willing but temporarily unable to pay before you employ a collection agency.

‘Spray-hitting’ – sending all overdue accounts out for collection by a Debt Collection Agency – can look like a great option when your cash flow situation is so wretched that you have to worry about where the next wage bill is going to come from - but it’s still a very, very, bad idea indeed.

I remarked many months ago that successful debt collection has never been about aggressive or confrontational behaviour. Unfortunately, debt collection agencies can be both aggressive and confrontational – and very destructive of commercial relationships.

One or two poorly managed or overly aggressive telephone calls from ‘stranger’ agency personnel can destroy all the work you have put in to building a good relationship with a customer - and send the possibility of friendly negotiation (and future trading!) straight out of the window.

And - as I have said before - times will get better, and people have long memories.

You may indeed think at the moment that you ‘need’ to employ a collection agency to solve your problems, but I believe that you need to consider all your options very carefully before you do that - and I have, after all, been in the business of collecting other people's money for more than fifty years now.

The fact is that circumstances alter cases - and at the moment the circumstances are not just unusual but unprecedented. We all have to adjust to that.

I’ll be talking about choosing and using agencies tomorrow. In the meantime, though, if you’re thinking of going down the agency route, you might want to spend some time dividing the sheep from the wolves on your ledger.