The news story that broke last week is unequivocal: Canada is on the brink of a debt crisis, and no one seems quite sure what to do about it.As a people person, statistics don’t often raise my pulse. This one was impossible to ignore because of the breadth of scope. According to a national survey by MNP, Canada's largest insolvency firm, fully half of all Canadian households are now within $200 a month from insolvency. Nearly as many respondents (49%) say they aren't confident in their ability to cover expenses without going deeper into debt.
“Why didn’t I see this coming?”
Sadly, those are common words in the debt collection agency world. All too often, when a debt goes bad, the credit grantor has overlooked one or more clear warning signs.
Here we go again.
In 2019, four provinces held elections: Alberta, PEI, Newfoundland and Labrador, and Manitoba. Now, all Canadian voters will head to the polls to “decide the future of the country in the most important election in our history.”
For most business situations, it makes a lot of sense to send overdue files to a good collection agency for accounts receivable recovery. In fact, a number of business models that will probably surprise you (from law firms to funeral homes) do it all the time.
But there are times when sending an account to collections may not do much good. Here are four good examples where a collection agency probably can’t help—and how to avoid such situations in the first place.
If your business has never used a collection agency before—or even if you have—you may be unsure about when is the right time.
How bad do things need to be in order to escalate matters and send an account to collections? In general, not very bad at all. In most Canadian provinces and territories, the statue of limitations on debt is a mere two years. What’s more, you deserve to be paid on time, always, so it should NEVER have to get that bad.
Here are seven sure signs it’s time to send a file to collections:
It’s a fact: business owners have a ton on their mind.
Entrepreneurs are statistically more likely to be worried, stressed or depressed than the general public, a fact that will come as no surprise to most owners. You have to manage partnerships and cope with lost deals, human resource issues, ever-increasing competition, shrinking margins, regulatory issues and a daily barrage of other surprises. You may be tough and smart, but you’re only human.
Any business that provides credit terms to its customers will face occasional challenges collecting debt. It simply comes with the territory.
Yet not all entrepreneurs are comfortable sending overdue debt to a collection agency—even when experience shows that aging accounts bear an ever-increasing risk of morphing into bad debt writeoffs.
Ironically, the most common reasons business owners and AR Managers give NOT to use a collection agency are based on old misconceptions. Here are 5 reasons to never use a collection agency, all of which are completely wrong.
Entrepreneurs are some of the bravest people in the world. They strike out on their own and stake their livelihood on a dream in a world of unprecedented competitiveness, knowing full well their chances of failure are exceedingly high.
And when it comes to collecting debt, most startup owners are ill-prepared for what awaits them. Vendors are reluctant to grant credit to startups lacking a history, and customers can take advantage of your inexperience or lack of confidence, paying your bills after higher-priority ones with established partners. It's a double-whammy many entrepreneurs never see coming.
Here are four steps every entrepreneur should take to improve their startup business’s probability of surviving those critical early years:
Do some of your customers take unreasonable time to pay, consistently holding out for 60, 90 days or more?
In most cases, they probably have (or could find) the money to pay much sooner. They ought to—having made the purchase and agreed on your terms in the first place.
The reason for the delay is simple. To be blunt, they’re using you.