B2B collection agencies help companies recoup on unpaid bills
By Don Harris
Far too many business owners and operators don’t realize that a sale is not a sale until they see the money. They put plenty of emphasis on the front end of their business — development, marketing and selling — but often the back end, getting paid, doesn’t get the attention or resources needed to make a company truly successful.
After three months, the probability of collecting on a debt drops to about 70 percent, according to the New Jersey-based Commercial Collection Agency Association. After six months, the likelihood declines to 52 percent, and after a year, the chances of collecting on a delinquent account drop to less than 23 percent, the association estimates.
That’s where professional commercial collectors come in. They recoup untold millions of dollars for businesses, helping the bottom line in today’s troubled economy. Rates for doing the collection deed are pegged to a percentage of the amount recovered, and many don’t charge anything if they come up empty.
Don’t confuse these collection agencies with the ones that send employees tiptoeing into someone’s house to repossess a refrigerator or jump-start a car in the middle of the night. They’re involved in what insiders refer to as B2B collections — business to business. For the most part, they steer clear of consumer debtors. They do, however, repossess heavy equipment or machinery for which the buyer failed to pay.
Rich Hollerbach, CEO of Singer, Bach & Associates, with operations in Scottsdale and Tucson, says his firm has two paths to debt collection — the soft approach in the early stages of delinquency and more aggressive tactics for troublesome situations.
Hollerbach, who has more than 20 years of B2B debt collection experience, says the key in either scenario is to try to maintain a good business relationship between his client and the debtor.
“We try to find out the reason for non-payment,” he says. “It’s more of an audit-type approach. We become an extension of their in-house collections procedures. A lot of times we find out there was some type of miscommunication, or maybe there was a potential problem with the products or services that were delivered. Retention is the key thing. We want to make sure they will continue to do business with our clients.”
In more difficult collection situations, Singer, Bach & Associates conducts investigations to determine the ability of an indebted company to pay.
“We might go to their business for a face-to-face meeting,” Hollerbach says. “There are several reasons for non-payment. Maybe it’s a cash flow problem in their own business — they didn’t get paid for whatever they’re re-selling — or their industry has taken a hit or it could be a seasonal issue.
“We’re going to want to know who else they owe, how much they owe, do they have any tangible assets, and how well their business is doing. And, we want banking and tax information. We gather all of this so we can make an intelligent decision if we can’t come to a voluntary resolution,” Hollerbach continues. “We do this so we’re better educated and we actually collect from a position of strength.”
Hollerbach recalls instances in which a debtor claimed he couldn’t pay.
“I might say that we found an opportunity for (the debtor) to liquidate this particular asset to take care of (an) obligation to my client,” he says.
Litigation is usually a last resort, depending, of course, on the amount owed. It’s often a case of throwing more money at a bad debt, especially if the debtor is about to go out of business.
Singer, Bach & Associates, which only gets paid if it collects for its client, tape records its phone conversations to protect against unwarranted claims.
“We deal on the negative side of business, and emotions get involved,” Hollerbach says. “A lot of times we’ll find out with this process that we weren’t out of line. The customer just got upset and they’re complaining to a regulatory commission or to our clients themselves. It’s a good control to have in place to make sure everyone’s doing what they’re supposed to be doing.”
The recordings also enable supervisors to critique collection staff members.
“It’s a great training tool for us,” he says.
Clients include transportation companies, insurance, media, lenders, and commercial leasing.
With baby boomers aging, there likely will be a greater need for wheelchairs, walkers and medical beds. Commercial debt collectors might go after doctors who fail to pay for equipment and products manufactured by a collection firm’sclients. But they don’t try to collect from patients who owe doctors.
“The bottom line in our B2B world, first and foremost, is dispute resolution,” Hollerbach says. “We take the emotion out of the transaction, and we allow each party to understand the importance of resolution. From a client’s perspective, it is obviously to get paid. From a debtor’s perspective, there was something that went wrong. We have to bring both sides together to figure out what went wrong and how we’re going to get past it.”