Debt Collection: Should you invest in outside help?

January - the month
when businesses look
to recover outstanding
balances accrued over the holiday season.
Collecting overdue accounts is, for
many small business owners, the most
unpleasant task of all. With today’s
economic crisis, companies must be
flexible with payment options, and in
doing so, they are creating positive cash
flow. However, the challenge arises
when accounts go past due; many
companies do not have the extra time,
skills, energy and resources required
for debt collection. This is even more
important as recent laws affecting how
creditors can go after delinquent debtors
have been enacted. Knowing when to
bring in the experts is crucial to the
success of any venture.
Phone Calls & Letters – The number
one place to start is with open communication.
Trying to gain an understanding
of why the debt remains unpaid can
sometimes lead to a favourable solution.
Establish a systematic plan to follow up
on past due accounts: phone calls, past
due notices, or make a personal visit. Be
sure to document your activities- letters,
main contacts and conversations. If any
dispute arises, you will have accurate
records to support your efforts.
Thereafter, the next step is to enlist the
help of a neutral third party.
Debt Collection Agencies – Agencies
come in all sizes — some are local,
some specialize in handling certain
kinds of debts and others are national in
reach. The cost varies, depending on the
volume of business you bring to the
table and the amount of debt that is to be
recovered. Plan on paying up to 30 percent
of the amount collected, with some
agencies demanding a 50-50 split.
Collection agencies usually will handle
smaller debts, but only if you give them
volume. If done methodically, you should
see positive success in your recovery efforts.
Hire a Lawyer – Lawyers who specialize
in debt collection are often most
effective, than a collection agency, especially
if the debt is serious enough to
consider legal action. Attorneys usually
charge a minimum fee, or require the
debt be of a minimum amount. Payment
to the attorney is in addition to any
court-related fees and charges connected
with a lawsuit can be costly. While it
might seem that a collection agency
would be a cheaper alternative, the price
of collecting a debt often depends on the
complexity and magnitude of the
collection. Investing in a Pre-paid legal
plan, like PPL Legal Care of Canada,
can greatly minimize such a financial
burden and can maximize results when
needed. Pre-Paid Legal does all the
work in retaining a qualified lawyer and
offers a variety of litigation services.
Monthly plans start at $43.50 per month
(home-based business) and range up to
$175 per month (mid-size business).
The Bottom line to Debt Collection –
At times, a simple approach, such as a
payment schedule may be all that is
needed. Then again, the situation may
require more sophisticated debt recovery
tactics, such as mediation or a collection
agency. The key to successful debt
recovery is to work with an organization
that is professional, affordable to you,
persistent in recuperating the owed
funds and offers a personal representative
to help you along the way. Sensibly,
it is one of the best ways to get your
debts paid sooner rather than later.
Sharla Trudell is a local Certified
Management Accountant who has owned
her own accounting practice for close to
20 years. She is also an independent
associate of PPL Legal Care of Canada
Inc. and GoSmallBiz.com. She can be
reached at strudell@sympatico.ca or
705-761-0200. Her website is www.prepaidlegal.
com/hub/sharlatrudell