During the pandemic, so many business owners and entrepreneurs found themselves facing a stark “new normal” that made it harder to collect on their outstanding invoices. Commercial debtors and default accounts have always been common issues for businesses. More so over the last couple of years!
But when do these annoyances become detrimental to your own company, and what can be done to prevent them? In this blog post, we will discuss the specifics of commercial debtors and default accounts. That way, you’ll be prepared and be able to act quickly at the first signs of trouble.
Commercial debtors are businesses that owe your company money, while default accounts are those which have failed to make payments on time. In both cases, you’re not receiving the full amount of money that’s owed to you.
Default accounts become an issue when they’re no longer able to make timely payments. This can happen for a number of reasons, such as financial difficulties or poor management. If an account becomes delinquent, it’s important to take action quickly.
There are a few things you can do to recover the money you’re owed. You can send a demand letter, which is a formal notice requesting payment within a certain timeframe. If that doesn’t work, you may need to hire a debt recovery service to provide more focus on debt collection.
When a customer defaults on their account, it can have a ripple effect that negatively impacts your business in a number of ways. First and foremost, it means that you are not getting paid for the goods or services that you have provided.
This places a strain on your cash flow and makes it difficult to cover your operating expenses. Default accounts can also lead to higher interest rates and late fees, which can further eat into your profits.
Moreover, defaulting customers often force you to move into debt recovery mode, which can be time-intensive and take away from the quality of the goods and the services you’re providing. Too many of these types of accounts can also be red flags that your business, as a whole, is unsustainable.
We’ve established that delinquent account issues cost your business the time and resources involved to collect payments. They also damage your reputation if potential customers learn you’re unable to collect on past-due invoices. Now it’s time to look at preventing that from ever happening.
There are a few things you can do, fortunately. First off, create clear and concise invoices that list the terms of payment and the consequences of late payment. Next, establish procedures for following up on late payments.
This includes sending reminder letters and making phone calls. A good reminder letter includes the amount owed, the original due date, and any additional late fees or interest that has accrued. For phone call attempts, be sure to document the date, time, and outcome of each call.
You should also consider using a debt recovery service if you have several accounts outstanding. Debt recovery services dedicate their resources to pursuing repayment, while you have to divide attention across multiple responsibilities. Taking these steps will reduce the likelihood of delinquent account issues from becoming a recurring problem.
Over time, you’ll start to get a feel for who your reliable debtors are as well as those who are consistently behind the 8-ball. If you’re concerned that problems are already starting to develop, it’s time to be aware of the common signs of trouble. Here are some things to watch out for regarding poor debtor behaviors:
If you notice any of these red flags, it’s important to document each and every action. This will help you hold their feet to the fire while the balances are still outstanding. Once they’ve gone to a “default” status, you have the documentation in place to pursue these accounts more aggressively (while staying within the scope of federal and state laws and regulations, of course).
If you’re a business owner, it’s important to understand commercial debt and the consequences of not paying it back. At some point, you may need to take action to protect your business. Southwest Recovery Services is here to help with the knowledge, resources, and systems that are designed to recover what you’re rightfully owed, and quickly. Contact us today.
We make it fast and easy to refer past due and delinquent accounts to our professional recovery agents. You decide the range on what you will accept on each case, and you ONLY pay a percentage of what we actually collect to resolve the case. Ready to get started, or want to learn more? Fill out this form and a dedicate account manager will call you to get started.