As wonderful as all your dance students are, there’s always a chance that one or two parents will try to skip out on their bills. It’s certainly an unfortunate and awkward situation to handle, but it’s often an inevitable part of being a small business owner. While every situation is unique, and there may be instances in which you are able to meet privately with a parent and work out payment arrangements, there will be times that parents simply aren’t paying their fees. When you’ve sent multiple invoices, made phone calls, sent emails, etc. and received nothing back, you have two main options: accept that you probably won’t see that money or enlist the help of a collection agency.

There are probably a lot of considerations you’ll want to take into account before hiring a collection agency, but the bottom line is whether the service will be worth it for your particular situation. If you are a dance studio owner, here’s how you can figure out if you need to go to collection and a few tips to make the process a smooth one.

Are Collection Agencies Worth It?

Perhaps the most important factor to take into account when deciding how to handle past-due bills is whether going to collection will be worth it financially. If you have a customer who owes $50, chances are that the process of sending the account to collection and having service fees deducted won’t be worth it for the minimal amount of money you’ll get in return. However, bigger bills can sometimes make or break your studio, and if you get the sense the parents aren’t going to pay, it might be time to call in the professionals. After all, it’s better to get a portion of the total bill after the agency’s commission than to get nothing at all.

Many small business owners think that if they’re persistent, they can collect the money themselves. This is sometimes the case, but it will likely sap your time and resources to be calling, emailing and mailing the customers in question. You should also realize that the longer an invoice is past due, the less likely you are to see your money. A survey from the Commercial Collection Agency Association found that after three months, the probability of you collecting the money drops by 30 percent. At six months past due, there’s only a 50 percent chance that you’ll be able to collect.

Will Using a Collection Agency Hurt Your Reputation?

Sometimes small business owners are hesitant to work with collection agencies because it will hurt the company’s reputation. It’s no secret that customers generally dislike collection agencies, and there’s always the chance that the disgruntled parent will tell your other customers what transpired.

It’s a real possibility and you’ll have to decide if you’re willing to take the risk. However, one studio owner put the issue into perspective on a forum about collection agencies.

“If people don’t like collection agencies, then they need to pay their bills or at the least work out an arrangement to pay off the debt,” explained the owner on Dance.net. “A dance studio is a business and needs to be thought of as a business and run like a business.”

As always, payment policies should be clearly stated in registration materials and student contracts. Since payment issues could potentially affect a student who is still taking classes, carefully think through whether students with delinquent accounts can still attend, and make sure those policies are also communicated. If you run into problems down the road, these policies will give you a solid foundation for dealing with delinquent payments, and will help protect your studio’s reputation.

How Can You Streamline the Process?

The first time you use a collection agency, you may be a little lost in the process. However, you can make the ordeal easier by picking the right agency to work with and knowing what to expect.

When choosing a company to handle your collections, ask if they’ve worked with dance studios before and get references if possible. Call the other studios and see what their experiences were like before you sign up with an agency. The Fox Small Business Center recommended you check that the company is authorized to collect money from debtors in other states in case your past-due customers have recently moved. Don’t be afraid to get in touch with a few different agencies to find the one that’s the best fit for your needs.

Once you’ve chosen a company to work with, you can sit back and let them handle the awkward encounters. However, be aware that your past-due customers may very well call you to try and work things out. In these situations, you should simply explain that the matter is in the hands of the collection agency now and all communication and payment should go through them. Remember: You’re completely within your rights as a business owner to do what it takes to get the money you’re owed!

It’s always a good idea to build a relationship with the agency, especially if you think you’ll need to use them again. Be available to answer their questions and try to set up a meeting so you can talk about best collection practices face-to-face.

“When you hire a collection agency, you’re hiring a business partner,” Martin Sher, co-owner of AmSher Receivables Management, explained to Fox. “Smart clients meet with their agencies, discuss any issues that arise, provide them with any information they need and give them feedback.”

Using a collection agency probably won’t be an enjoyable experience, but at the end of the day, you’ll come out a stronger, more efficient business owner.