As businesses deal with the burden of debt collection from late and non-paying customers, the inevitable question that arises again and again is how to successfully collect debt? As all businesses face cash flow and accounts receivable challenges, the answer to this question has to be dealt with sooner rather than later.
Many companies are hard pressed to find the extra time, energy and resources required to go about the extensive work needed for debt collection. This is even more important as recent laws affecting how creditors can go after delinquent debtors have been enacted.
Here are 3 important tips that answer how to collect a debt:
1. Have Clear Internal Debt Collection Policies
As the owner of your company, you are most acquainted, both with your customers, as well as how unpaid debts negatively impact your business. Because of your unique customer relationship, it is a good idea to think about the debt collection process at the beginning of the relationship, before the onset of a problem.
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 imperative to have clear and consistent internal debt collection procedures in place. Whoever is responsible in your business for handling collections needs to know statements and reminder letters are to be mailed, as well as the necessary phone calls. To be successful, these policies have to be kept consistently.
2. Know When To Outsource To Collection Agencies
If handled consistently, you can reap some success in your debt recovery efforts. The question you need to ask yourself is are your internal net results worth the costs in time, labor and money? At the end of the day, is it worth doing yourself? You may be better served to consider outsourcing to an outside collection agency.
Advantages for outsourcing your debt collections include focusing on the core, money-making functions of your business, while letting a more efficient and experienced specialty organization handle debt collecting for you. Collection agencies act on your behalf, and they’re better suited to deal with debtors and are more successful.
3. Consider Hiring A Collections 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.
Learn additional info and solutions concerning commercial collection agencies inside of your company. Michael Forsyth has been a distinguished industry authority, corporation specialist and journalist on commercial debt recovery options for 30 years.
