Solving the Collections Problem

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The very concept of extending credit to another is fraught with a number of problems. At a very basic level, every single time you extend credit to an individual or an organization you are taking a significant gamble. As much as credit card companies issuing plastic, banks giving our mortgages and suppliers taking net-90 terms may like to think they’ve figured out how to tell a potential problem client from a “sure thing,” it’s ultimately impossible to know who will make their monthly payments and who won’t. Even seemingly high quality, highly reliable clients will miss a payment here or there, and even the most affluent of clients can allow their loans to drop into delinquency.

Instead of obsessing over developing formulas that will help you find a truly “risk-free” client, it’s wiser to simply factor risk into you projections. Instead of attempting to only work with clients who you believe will never default on a loan, it’s better to create systems for collecting debts once they’ve fallen into delinquency.

The majority of companies would rather not collect their own delinquent debts. Not only is debt collection still considered a somewhat distasteful act, fixation on debt collection forces an organization to divert attention and resources away from what should be their primary focus; the day-to-day running of their business. Most companies will benefit from working with a qualified and experienced debt collection agency, especially if the debt they are looking to collect is business debt. Doing so will allow that organization to focus on what matters most, and to benefit from the expertise of a professional collection organization.