Small businesses work on small, sometimes exceedingly small, margins. That problem is not helped by the raft of unpaid invoices that small businesses carry on their balance sheets. It’s not a trifling number either at more than $800 billion total.
Sadly, emergency restoration companies are not immune to this debt problem. Given the essential services they provide in the wake of disasters, neither they nor the distressed communities they serve can afford for these companies to go under because of debt.
The good news is that debt collection can help your emergency restoration company recoup some of those unpaid debts and improve your solvency. We’ll go over what you need to know.
What Is Debt Collection?
Most businesses including those that offer damage restoration services, operate informal debt collection. They send past due reminder notices to customers who don’t pay. Unfortunately, these unpaid invoices often go untended by small business owners.
In fact, not reconciling your books is one of the most common small business accounting problems. Once a customer ignores two or three past due notices, though, you must take action to protect your bottom line.
This is where a small business debt collection company enters the frame. These companies take over the collection process for you. Handing over the process lets restoration companies focus on their core business activity of emergency restoration.
The debt collection company takes customers through the permissible steps to get your old invoices paid.
How Do Debt Collection Companies Work?
While some debt collection companies will work with anyone holding overdue invoices, most debt collectors specialize in particular industries. For example, one collection agency might work primarily with financial and healthcare businesses. A different agency might specialize in small and medium-sized businesses like emergency restoration companies.
That specialization helps them target customers, but it also means they understand the specific needs of your industry. While healthcare companies must tread carefully around patient data protection, restoration services must manage customers coming out of potentially traumatizing circumstances such as flooding or losing their home due to a fire.
In exchange for taking on the debt collection process, debt collectors typically take a percentage of whatever money they recover. The percentage can run high for many business owners, so make sure you know how much they’ll take before you sign on with a company.
The upside is that collection agencies only get paid if they actually collect on the debts, so they typically prove motivated.
Debt Collection Process
The debt collection process really is a process with many potential steps, which would be too time-consuming to do in-house. Let’s take a look at some of the key steps in the process.
One of the primary tools in the debt-collecting arsenal is phone calls. The collection agency will typically call the debtor on behalf of the emergency restoration company as the first step.
The first call lets the agency tell the debtor that the invoice is now in collections. The call also lets the agency lay out the details of the debt, such as what company the debt originally came from and the amount.
Despite what popular media and horror stories on social media might suggest, most debt collectors operate strictly within the rules set out by the FTC. So, they don’t start calling until after 8 a.m. They also stop calling before 9 p.m.
After making or at least trying to make initial contact by phone, the collection agency will send out a collection letter. The letter is essentially the same information the debtor would get in the initial phone call.
It includes the origin of the debt, the amount, and information about the collection agency. In many cases, the letter will include information about how the person can settle the debt, such as payment plans.
If the first letter gets no response, the agency will keep sending letters in an attempt to find a solution. Again, this is something, from experience, that most if not all emergency restoration companies simply do not have the time to take on.
Emails and Texts
The agency may also use emails or text messages to try and contact the debtor. Emails may contain specific information about the debt, while most text messages will only contain general information. For example, the text might contain a phone number or link to the agency website.
Assuming you don’t sell the invoices outright to a collection agency, they’ll likely ask if you’ll settle for partial payments. If you will, the company may offer these partial payment options to settle the debt.
Customers who ignored other payment options will often scrape together the money to make a reduced one-time payment to deal with the debt. Those who can’t afford even that will often opt for a payment plan on a reduced total. How this would be best approached is something that would be discussed with emergency restoration clients.
Things to Know
Debt collection agencies operate under a number of very strict guidelines about what they can and cannot do. For example, a debt collector cannot present themselves as someone from anything but a collection agency. If they act like they’re from a government agency, it’s a serious breach of the rules and can create serious problems.
Collection agencies also cannot make anyone’s debt public in any way. They can’t even discuss the debt with anyone aside from you or, if applicable, your spouse. That rule is so strict that it prevents them from even putting information on an envelope that might expose the debt.
Your collection agency also cannot issue threats, such as saying that someone will get arrested because they haven’t paid yet. While no one goes to jail for consumer debt in the US, it’s a serious breach to suggest that it might happen. Reputable agencies won’t do it or condone it. Emergency restoration small businesses can focus on working with insurance companies, local first responders and homeowners with peace of mind that their debt collection company is pursuing debts the right way.
Debt Collection and Your Restoration Business
While you might not love the idea of sending your customers to debt collection, it’s often the only way of getting even partial payment on unpaid invoices. Pick your collection agency with care.
Ideally, you’ll work with a company that deals with emergency restoration companies on a regular basis. It spares you from explaining what kinds of things are on your invoices and why.
Don’t wait too long before sending someone to collections, as some agencies won’t’ accept invoices over a certain age.
FFCC brings years of experience with emergency restoration debt collection. To get started, contact FFCC today.
First Federal Credit Control
1761 W Hillsboro Blvd #320
Deerfield Beach, FL 33442