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Does your small business have soaring unpaid invoices? Do you not have sufficient staff to make collection calls? You may benefit if you hire a collection agency. They can collect your unpaid bills and prop up your finances, all for a very affordable fees.

Small and home-based businesses have to face the daunting task of collecting outstanding bills at some time or the other dealing with bad debts. Whether an uncollected bill is the consequence of legitimate shortage of money at the client’s end or her being a customary nonpayer, overdue amounts must and should be collected before business goes into deficit. Business owners should have a sensible action plan to deal with these eventualities effectively. Collection agencies are a good choice for small and home businesses without the necessary bandwidth and resources to collect overdue bills proficiently.

Infrequent overdue receivables can be accommodated in the balance sheet, but frequent unpaid bills take a toll on the cash flow. If the total cost of the bad debts is substantial enough to justify the price of hiring a collection agency, it is the best bet to get your money from delinquent customers.

Guidelines for selecting a commercial collections agency

A debt collection agency will be dealing with your clientele and it should respect your policies and customer service principles. Clients will perceive the collection agency as an extension of your business and any impressions they form will definitely have some effect on your customer relationships. Therefore, you should evaluate a few key points while picking out a collection agency, such as:

• Previous experience working for similar business size and type: Shop around for a collection agency that has worked with small and home-owned businesses and understands their way of operating.
• Experience with collecting from similar businesses: A collection agency that has handled clients often seen by businesses of your size and type has a better probability of succeeding. Individual debtors and commercial defaulters are completely different and have to be dealt with differently.
• Skip tracing: Sometimes, debtors move without leaving a forwarding address or have their phone lines disconnected. Collection agencies use skip tracing – accessing numerous databases – to pin down the whereabouts of debtors and remind them of what they owe.
• Collection strategies followed: Verify the collection agency’s collection tactics. If the agency has a good success rate from mailing letters to defaulters, peruse them yourself to ensure it does not violate the Fair Debt Collection Practices Act. In doing so, you protect your client relationships. Respectfully yet firmly worded letter can get customers to make their payments and also carry on doing business with you.
• Errors and omission insurance: Collection agencies and servicing businesses are covered from liability by the Errors and Omission insurance if upset debtors file a suit against the strategies employed to collect the debt.
• Licensing issues: The collection agency should be licensed to collect debts in locations occupied by the debtors. Otherwise, the collection agency and business being serviced can be charged for unlawful debt collection without a license.
• Collection agency rates: Debt collectors work on set fees or contingency rates. The contingency rate is a percentage of the total debts collected. It is recommended that you get a rough idea of the cost based on the collection agency’s success rate and contingency rate before picking out the pricing option. Assess what each option will cost you in both cases – fixed versus contingency, and select the one that works best for you.

Bad debts weigh down every business but they can cause more damage to small and home businesses that do not have the necessary buffer to protect them in lean periods. Collection agencies are a rational choice as even after deducting their fees, you receive a considerable percentage of the collected amount. Daljeet Sidhu is the author of this article.

Tax time comes around like clockwork each year and each year your business has several tax deductions that must be calculated. Of course, if you are making so much in annual revenue, you will owe a bit to the IRS, but what happens if you miscalculate your deductions and payment to the IRS and end up with a tax cash shortfall? You could definitely get a loan, but the process could be long and end with a bit of penalties from a late payment and the outcome could be your business going further into debt. So what then?

Receivables financing, better known as invoice factoring, is a long time financial practice that has been used in small businesses since way back when. The trend towards accounts receivable factoring is beginning to regain fuel as more and more businesses are finding the process highly beneficial in contrast to bank loans for many reasons. The most significant reasons are:

• Quick Approval
• Immediate Funding
• Acquisition of Owed Monies
• No Collateral or Repayment
• No Interest

What makes factoring such a beneficial practice when it comes to tax cash shortfalls is the fact that the process is so quick. You could literally sell most or just one of your unpaid invoices, obtaining money that is already owed to you but just hasn’t been paid yet. As you will likely have a deadline to pay the IRS the shortfall, you will be able to receive the monies in a timely manner, unlike with a loan. You also won’t have to deal with any interest rates and high payments to the lender.

Invoice factoring allows you to sell your unpaid invoices to a factor, who will give you a very large percentage of you monies for an advance. You will pay a small fee that can range from 1%-10%, depending on the factor, and you can receive your money between 24 hours to 7 days, also dependent on the factor. Within hours using factoring, you could have the funding you need to pay the tax cash shortfall without feeling any repercussions from the experience.