Whether you’re in the business of lending money or selling goods, your business can only be successful if your customers are paying on time. In special cases, some customers may not repay within the deadline, which is understandable provided they eventually clear the debts. While some businesses in the money lending industry provide an extension at some interest, others choose to pursue the exact amount owed to them through either negotiations or legal action. Whichever approach you take, what matters is what works best for you.

As a business, you should be able to tell whether a customer is likely to repay or not. You can tell this by observing whether they’re keeping to the predetermined payment plan or not. The earlier you can to tell this, the better. According to a research report, the collection rate drops by 1% per week after the client fails to repay. This percentage shoots to 26% in three months and 42% in six months. The concern here is that should you fail to recognise this early enough, your chances of posting a write-off shoots up.

As days go by and you continue following up on the debt owed to you, you end up utilising a lot of your productive time on something that will most likely not be as profitable to you as focusing on what you do best. Here is what to do. As soon as one payment term is breached, start monitoring that respective customer and seek to establish why that particular component of the agreement was broken. Immediately you realise that nothing is forthcoming, act forthwith.

What would be the best action, you may ask? Well, contact a debt collection agency. Working with a debt collector is quite profitable in the long run. The reason being that it helps you transfer the onus of following up on the debtor, allowing you to concentrate on attending to your other customers.

Below are some red flags that should notify you to reach out to a debt collector.

Personal Challenges

No one would want to be embarrassed by a debt collector or an auctioneer visiting their home or business premise. Notwithstanding, a situation might creep in that would make us care less about such eventualities. For example, divorce, serious illness in the family, loss of a close family member, and such like things are likely to make us neglect our obligation to clear a debt. While some recover very fast out of such hiccups or they just negotiate for a friendlier payment plan, others take way longer or never recover at all. As a business, once you realise that your customer is facing any such challenges, the perfect thing to do is to offer amiable, renegotiated terms and hand over the debt collection responsibility to a debt collection agency.

Business Challenges

Whether you’re dealing with a company or an individual, as soon as the business they’re attached to starts going down the drain, you’re likely to be faced with unanswered calls, contact to client no longer active, lame excuses, missed promises, unavailability, or unresponsiveness even when you write demand letter. Some signs that a business isn't doing well, the signs of which should raise the red flag, include a business moving to a new location with no concrete reasons, layoffs, an application for a bank loan, application for bankruptcy, invoice approval not as fast as it has always been, receiving small partial payments, or a promise that will only pay you when their customers pay. Every business face ups and downs, and you should be shrewd enough to tell whether a given customer won’t pay on time or may never pay altogether. When you see such signs, with no coherent communication coming your way, it’s time you reached out to a collection agency to pick up the responsibility.

As soon as it becomes apparent that your client isn’t about to repay, don’t spend so much time on it. Giving your attention to that would disrupt your normal flow of business and dampen your productivity. If, say, you choose to take legal action, you may end up spending a lot of time and energy within the court corridors. The best approach would be to reach out to a collection agency, agree with them on a workable payment plan to propose to your customer, with every payment term clearly spelt out.

By so doing, the agency would do all the follow-up with the debtor so that you receive your payment stress-free.