“Being sent to collections” is a boogie man for businesses as well as for individuals, I learned this week.
I was counseling a small business with lots of vendor debt.
We were looking for a strategy that could keep them in business.
When I suggested that management sort their payables into vendors they needed and wanted to keep, and those they could live without and wouldn’t pay going forward, I heard the familiar refrain: “but they’ll send us to collection!”
Sent to collections
Where is “collections”? What is so bad about a corporation being there? It isn’t painful…
Let’s think: “collections” is little more than an accounting category including debt that isn’t paying or isn’t likely to pay without something more.
Collectors, whether business or consumer, rely on the same weapons. Their job is to “motivate” the debtor to pay up, because the alternative approaches for the creditor are expensive, timeconsuming, and uncertain.
My pitch to this business was premised on the idea that
1) there wasn’t enough money to pay everyone;
2) they had multiple sources for the product they bought from this vendor; and
3) the survival of the business was at stake.
It is certainly unpleasant to face the fact that you can’t pay everyone you owe. But that’s a risk that comes with being in business, for both the debtor and the creditor.
Individuals face the same dilemmas when there isn’t enough money to go around. I try to inculcate in consumers the same view as I pitch to businesses:
this is only money we are talking about. It’s not character or self worth.
Both sides to a credit transaction know at the beginning of a transaction that payment isn’t assured. That’s why credit comes with a cost, to cover that risk.
Business sometimes requires that we make decisions and take actions that we wish we could avoid. It comes with the territory.
This group of clients left with a plan to focus on the big picture, reduce the overhead, and trim the cash outflow dealing with the past.
My hope is that there is a future for them as a result.
Image courtesy of Toybot Studios and Flickr