Collection & Bad Debt Solutions

Collection & Bad Debt Solutions

Keeping up with customer debts, as well as maintaining an accurate record of payments received, are fundamental business elements. Often there are logical reasons for accounts not being paid and which are falling past the 90 days due date.

The Proactive Approach

Assessing the problem on a proactive level involves setting up systems and policies to stop collection problems from occurring in the first place.

It is essential, for example, to set up proper customer information and to have on file application forms with the data necessary to help you find your customers easily, if they renege on payments, go out of business or simply disappear.

Often extending too much to your customer in the way of product or services can result in a customer being unable to pay an account that was out of their league in the first place.

But how can you be sure of how much of your product or service you should extend?

When do you extend to the limit and when do you start asking for deposits or retainers?

Setting up a safe credit application program can make sure you are not extending too much of your product and service, to prevent the risk of not getting paid in full. In some cases this may involve working with the major credit bureaus.

How many times has a company gone out of business leaving you with nothing but an outstanding account and a disconnected telephone number? You try to collect, but if the company is out of business, how do you get your money? You try suing in court but because the company is an incorporated entity you are not allowed to sue or collect from the business owner personally. You spend thousands in legal fees only to obtain a worthless uncollectable judgment and an expensive legal bill.

What you may not know is that as a business owner you have the right to incorporate “personal guarantee” policies into your customer accounts on incorporated companies. This simply means that if the company goes out of business, the business owner can be held personally responsible for his account with you. This policy has to be set up properly when you open a customer account. It must also be set up sensitively, in order to gain a customer’s confidence, rather than hesitancy, in the transactions with your company.

The Reactive Approach

Assessing the problem on a reactive level involves exactly that – reacting to the existing problem at hand.

Get into the right frame of mind about collections. Here are some suggestions:

Third party collection agencies make telephone calls and send letters. That is all they are licensed to do. They may report the debt into the customer’s credit bureau file. But even if they do actually collect for you, they are going to take 1/3 to 50% of every dollar they manage to collect.

If you are lucky, they might manage to negotiate post-dated cheques over time. In many cases, you will send off your accounts and you will hear nothing back from them. Collection agencies generally have only about 20% success. If your company is a member of the credit bureau, you may be able to report your outstanding account into a customer’s credit file to leave a ‘black mark’ in their credit history, making it harder for them to get credit while your bad debt sits in their credit file.


If you want a skip trace to find the customer, or you want that customer to be sued in court, that collection agency, lawyer or skip tracer will be asking you for a deposit and perhaps a big one.

Keep in mind that millions of people are awarded judgments from the court that they can’t collect, simply because the customer has no assets. They spend and spend, trying to collect, but with no success. A secretary or admin person could perform a lot of these collection tasks with right knowledge and/or the right software.

Many companies hire in-house collection clerks on a part-time or contract basis. Many companies handle all their collection problems in-house. Even Small Claims court documents can be downloaded from the Internet. You don’t necessarily need any legal knowledge to go after your account in Small Claims court, if the debt is a simple, cut-and-dried issue.

The Small Claims court recognises that people who come into their court may not have any legal knowledge, and the court can be somewhat accommodating. Many companies handle simple Small Claims court matters themselves. They merely send a secretary or an employee from their accounting department to prove that the debt is outstanding.

Our objective is to evaluate your collection problems and determine what aspects could be handled most cost-effectively in-house, under a program we would design for you. We would also recommend which concerns should be looked after by third-party agencies, based on your budget and our assessment of how collectable we consider the debt to be.

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