When most people think of collections agencies, they imagine workers seeking individual consumers to repay debts. Corporate debts far outweigh consumer spending and have their own unique collections process. The rules regarding B2B collections also differ because the existing legislations were established to protect consumers, not corporations.
What Is B2B Collection Process?
B2B collection refers to the process of collecting unpaid invoices or other forms of corporate debt. This debt can be sold to special agencies or business owners could hire professionals to handle the task. But it is usually left up to the B2B accounts receivable team to collect.
Sometimes, the debtor may have genuinely forgotten to pay the bill or thought they already did. Sending a gentle reminder that the bill is past due and offering payment options is often all it takes to resolve the issue.
2. Demand Letter
When reminders fail to work, communications become more urgent. These escalate to letters demanding payment. In many cases, a B2B collections attorney creates the letter or provides a template you can customize. Some companies prefer working with an attorney, so they can leverage the attorney’s header. The involvement of an attorney often prompts payment. Debtors try to avoid court involvement, especially when they are obviously in the wrong.
Sometimes, even demand letters go ignored or the company might claim it simply cannot pay. In these instances, the creditor might need to do some in-depth digging to determine whether this is true. Unlike consumer collections, there are far fewer restrictions on how deep you can dig to uncover hidden assets, business locations and other key findings.
4. Commercial Litigation
In some cases, it becomes necessary to fight it out in court. If you have a strong and obvious case and the debt is substantial, this might make sense. Otherwise, lawyer fees could far outweigh the money you hope to recover. In some cases, debtors might not respond to the lawsuit at all, which allows you to get a default judgment against them. However, this still doesn’t guarantee payment, particularly if the debtor then files for bankruptcy.
What Are B2B Collections Best Practices?
When tackling B2B accounts receivables, it’s important to develop a strategy. Knowing precisely what steps to follow can streamline the process of reclaiming debts, saving you time and money.
1. Monitor Debt
It’s important to monitor the money owed by individual debtors and the mounting debt at your business. Formulate a plan: You don’t want to wait until the debts owed and the average collection period have grown unmanageable. You will be in a much more desperate position and have fewer options if you wait.
2. Offer Flexible Payment
Ideally, your clients pay the money on time and in full. However, some payment is better than nothing. In some cases, it might be best to offer installment payments or settle for a smaller amount. This influx of cash can be the difference between scraping by and shutting your doors. Flexible payments should also include various methods, such as online, cash, check, credit cards or even inventory.
3. Seek Legal Advice
Did you know that thousands of law firms provide a free initial consultation? Leverage this to get basic advice before tackling any B2B accounts receivable collections that go beyond reminders and demand letters. However, if things become more difficult, consider seeking legal advice to find out your options.
4. Automate the Process
Automation does not guarantee your debtors will come running with payments in hand, but it does reduce the likelihood of unpaid invoices slipping through the cracks. Consistent communication also keeps you on your customers’ priority lists. And automation reduces the amount of time your accounts receivable team spends on monotonous and repetitive tasks.
At Gaviti, we have created software that helps our clients get paid faster and easier. It automates much of the hands-on work, so you and your accounts receivable team can focus on more value-adding tasks.
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