Did you know that the HVAC services market is expected to grow to $82.5 billion by 2026? With this large expansion, it’s crucial that these companies have fair practices and a strong customer base. However, issues arise when clients don’t pay their bills on time. As an air conditioning company, collecting debts from your customers can be a tricky process. You want to ensure your public reputation remains positive while still maintaining your relationships with customers.
Navigating this balance can be difficult when you as a company have to collect debt from clients. This article will offer advice on what to do if certain accounts go to collections and explain why your air conditioning company needs a debt collection agency on your side.
What is Bad Debt?
Bad debt is an expense that a business takes on when the payments owed by the borrower are deemed irrecoverable and must be written off by the creditor. Your customers might not be able to pay off debts due to bankruptcy, their bank’s credit line might have been withdrawn, or they might have bad credit to begin with. Whatever the reason is, bad debt is a risk that comes with extending credit.
If you haven’t received a payment for the debts owed within a 30, 60, 90 or 120 day period after they were owed, you can consider the debt to be bad debt. To write off the debt, you must be sure that the client cannot make the payment and the funds are irrecoverable.
Bad debt impacts your accounts receivable and can harm your finances and cash flow. If you as the creditor are facing issues of non-payment, it’s best to hire a debt collection agency to alleviate any stress that comes with collecting debts.
Here are Some Tips for Collecting Debt:
Protect Your Customer Base
Collecting debt from clients has the potential to strain the business to business relationship between your air conditioning company and the businesses you service. Hiring a third party debt collection agency can alleviate some of the strain that comes with collecting debts. However, you can strengthen the relationship by being civil and understanding when contacting your business clients. Be sure to take a positive approach before resorting to anger or frustration with the customer.
Use Multiple Methods of Communication
While emailing the invoices and sending reminder emails about late payments can be useful, it’s best to utilize multiple channels when sending payment reminders. Pick up the phone and call the businesses you need to collect debt from.
Send Invoices Early
Don’t wait to send out invoices. It’s best to send an invoice as soon as possible, so your client can pay off the services. Be sure to tackle debt within 45 days of overdue payments. After 60 days of overdue payments, it becomes more difficult to collect the payment, and that can turn into bad debt.
Make Sure Your Invoices are Clear and Understandable
If your clients aren’t making payments on time, they might not understand the wording of your invoice. To eliminate this confusion, review your invoice and make sure it has an invoice date, unique number, and payment terms and deadlines. Ensuring your invoice is clearly understandable will eliminate potential late payments. However, sometimes this isn’t enough. If you have clients who consistently don’t make payments, it’s best to hire a collection agency to handle future issues.
If you fail to set up strong business practices, you might find yourself with bad debt and irrevocable damages to your company’s finances. As an air conditioning company, your area of expertise is in HVAC technologies, and it can be overwhelming to deal with running your business and collecting debts from customers. This is where a debt collection agency comes in.
What Does a Commercial Debt Collection Agency Do?
A commercial debt collection agency will collect debt on the behalf of your company. If you’ve tried to collect debt on your own, and it hasn’t worked, it’s best to reach out to a debt collection agency. These agencies are skilled in working with air conditioning companies like yours to retrieve unmet payments. It’s important to note that debt collection agencies do not take on the debt that you are owed. You as the company still own the debt and are responsible for the money owed, but the agency acts as a middleman to collect debt on your behalf.
Debt collection agencies use a variety of techniques to ensure that you receive the money you are owed. These include:
- Certified demand letters: This letter is typically the first step a collection agency will take to retrieve debts. The letter has a balance statement, tells how much is due, and when the due date is for the payment.
- Negotiate payment schedules: Sometimes an air conditioning client will respond to the letter informing the agency that they’ve fallen behind on payments and need more time to procure the money. In this case, your company can allow the collection agency to set up a payment schedule to pay off the debt on a designated schedule.
- Phone calls: Certified demand letters are a formal process that provides documentation should you have to go to court. Collection agencies most typically call the client to remind them to pay off their debt.
Importantly, debt collectors use legal action as a last resort. They understand that client relations are an important aspect of business, and will use all other methods before filing a lawsuit.
A debt collection agency will ensure that debts from your clients are paid off before they turn into bad debt. Hiring a debt collection agency allows you to focus on running your business without worrying about losses to your finances.
At First Federal Credit Control, we serve commercial air conditioning companies like yours to ensure you can focus on your business. If you’re facing debt collection issues with your business to business transactions, talk to a commercial debt collection agency. Contact us today for more information.
First Federal Credit Control
1761 W Hillsboro Blvd #320
Deerfield Beach, FL 33442