When faced with the burden of debt collection from late-paying customers, the question your business is confronted with again and again is how to go about successfully collecting debt? Since all businesses have to face accounts receivable and cash flow problems, the answer to this needs to be dealt with sooner than later.
Most companies are strapped to find the extra time, resources and energy necessary to go about the exhaustive work needed for debt collection. As recent laws have changed affecting how creditors can go after delinquent debtors, this has become even more important.
Here are 3 important tips that answer how to collect a debt:
1. Have Clear Internal debt Recovery policies
As the owner of your business, you are the most familiar, both with your customers, and how unpaid debts negatively affect your business. Because of that unique customer relationship, it is a good idea to think about the debt recovery process at the beginning of that relationship, before a problem arises.
For example, its important to have a clearly written policy in your customer agreement or application. Included should be when payment is expected, any additional late fees and charges, even the cost of collections in the event an account has to be turned over to a collection agency.
Check with your attorney, as in many states the cost of collections can be passed onto the debtor, but only if it is included in the original signed customer agreement or application. This language is necessary in order to be legal. Again, speak with your attorney.
It is also critical to have clear and consistent in house debt collection procedures. Whoever is responsible for collections within your company needs to know when statements are to be mailed, reminder letters sent, as well as phone calls. In order to be successful, these policies have to be kept consistently.
2. When To Outsource To Third Party collection Agencies
When handled consistently, you will see some success in your debt collection efforts. The larger question you need to ask yourself is whether the time and resources costs to your business is worth doing it yourself? Are your net results worth what its costing you in time, labor and money? You might be better served to consider outsourcing this to an outside collection agency.
Advantages for outsourcing include focusing on your core, revenue-generating business activities, and letting another, more experienced organization deal with debt collections. collection agencies are more efficient, acting on behalf of your business, and they’re better able to deal with debtors and successfully collecting your debts.
3. consider Hiring A debt collection Attorney
You should also consider hiring a debt collection attorney. While debt recovery companies usually send written demand letters and phone calls, attorneys have more legal options available to them, such as being able to file judgments against debtors. You should know that attorneys are usually more expensive to hire than a collection agency.
At the end of the day, how you decide to collect your debt is yours to make. This choice should be made with costs, time and resources in mind.
Explore more info and tools regarding collecting debt for your business. David P. Montana has been a distinguished market place expert, industry advisor and author about debt collection options for thirty years.
