Three Principal Tips On How To Collect A Debt
When your business is faced with the burden of debt collection from delinquent customers, the question that arises again and again is how does one go about collecting debt? As all businesses have to deal with accounts receivable and cash flow issues, the answer to this question needs to be addressed sooner rather 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.
Listed are 3 important tips that address how to collect a debt:
1. Have Clear Internal Debt Recovery 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.
In many states, the cost of debt collection can be passed onto the debtor, but only if it is included and stated in the original customer application or agreement. Be sure to check with your local attorney. In order to be legal, this language has to be included in the original signed customer agreement. Again, seek the counsel of your attorney about this.
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
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.
Some advantages for outsourcing include focusing on your business and letting another specialized business handle collections, not to mention less frustration for you. Collection agencies act on your behalf, and they’re far more experienced in dealing with debtors and collecting successfully.
3. Consider A Debt Collection Attorney
You may also consider hiring a debt collection attorney. While collection agencies typically send demand letters and/or initiate phone calls, attorneys typically have more legal tools available to them, such as filing judgments and/or wage garnishments. It should be noted that attorneys usually cost considerably more than hiring a collection agency.
How you choose to collect your debt is your decision at the end of the day. Its a choice that should be made with costs, time and resources in mind.
Discover more tips and solutions concerning commercial debt collection in your business. Michael Forsyth has been a leading marketplace authority, business advisor and writer about commercial debt recovery services for thirty years.
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