Preventing bad debt is not an easy task for small businesses. The majority of companies have a bad debt budgetary reserve that is kept with the expectation that a tiny percentage of customers will not pay them in full. Even so, bad debt, uncollectable debt, and willful non payment can interfere with growth and profitability. Preventing bad debt, that is, the kind of debt resulting from a credit sale that the creditor is incapable of collecting, is not something small businesses can easily do solo. One reason for this is that it is nearly impossible to tell who are the good customers vs bad customers until multiple notices demanding payment have been sent and ignored. Hindsight is 20 20! Trying to get rid of bad debt can be challenging and time consuming, which is why working with a business debt recovery agency can be a great way to find debt recovery solutions and recoup the money you are owed.
Many small business owners are understandably concerned about the cost of turning over bad debt to a collector. Yet, there are a number of ways that a collector can help companies with preventing bad debt, and not all of these methods are expensive. For instance, small businesses can pay an agency a set fee to write a series of collection letters on behalf of the company. This tactic should not be confused with turning over debt to the agency.
Another reason that some companies might be reticent about hiring a collection agency is fear that the agency will participate in unlawful practices such as harassing debtors with too many phone calls, letters, or otherwise behaving in a threatening or menacing way as a means of preventing bad debt. Fortunately, very few companies employ these practices. The vast majority of collection agencies behave ethically, and this can be verified by obtaining recommendations in advance and doing the proper research before hiring an agency the function of which is preventing bad debt.
One scenario in which preventing bad debt may be complicated is when a debtor files for bankruptcy. Unfortunately, bad debt recovery can be quite difficult in this situation because sending correspondence to a person or company in bankruptcy as a way of preventing bad debt is against the law. The good news, however, is that creditors are allowed to attend and speak at bankruptcy hearings in order to make their case regarding why the debtor should have to pay them. This tactic does not always bear fruit, but it can be one of many possible ways of preventing bad debt. See more.