Overdue Bills Strain Creditors, Drive Collections Industry

Delinquent accounts are a growing problem for businesses — especially small companies that don’t have the cash flow to cover shortfalls, pursue the debt or eat the loss.

However, this cloud does have a silver lining for some businesses: The debt collection industry — the lawyers, agencies and bill collectors hired to track down debtors and get them to pay up — is thriving.

Nationwide, businesses lose billions of dollars annually just in unsettled judicial judgments. In 2000 — the most recent year for which data is available — Maryland had $259 million in unsettled judgments, ranking it among the five lowest states, according to the National Judgment Network of Theodore, Ala., a trade association for judgment recovery professionals. That year, there was $18.8 billion in unsatisfied judgments nationally, with $387 million in Virginia and $258 million in Washington, D.C.

According to data released by the Federal Reserve last week, the nation’s business debt, including secured debt, totaled $7.8 trillion at the end of 2004, up 4.8 percent from 2000.

“That is really the raw material for the accounts receivable management and debt collection industry,” said Paul Legrady, director of research services at Kaulkin Ginsberg, a Bethesda strategic advisory firm specializing in accounts receivable management.

As business debt increases, so does the debt collection industry.

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