Effective debt collection techniques are necessary to any business, regardless of the state of the economy. Knowing how to persuade your customers to pay their delinquent, past due accounts on time will increase cash flow to your business. After all, as a business owner, you have debts to pay as well. Absent the necessary adequate cash flow, you are risking falling behind on your own bills and commitments. This can lead to problems with your vendors and suppliers. Or to the loss of favorable credit terms with your banker or lender.
Knowing how to master your debt collection techniques can spell the difference between surviving and thriving in your business.
Listed are the top 3 debt collection techniques that will increase cash flow to your business:
1. Amend Your Payment Terms
Make sure you’ve clearly stated on your invoices, and any quotes you’ve provided, what your payment terms are. Most businesses allow 30 to 60 days before payment is due, but have you considered reducing your payment terms to 14 or 21 days?
Amending your payment terms can mean that you could potentially be receiving your money sooner rather than later. It also means an unpaid account becomes delinquent within a month so youre within your rights to commence collection services before too much time has elapsed.
2. Written Reminders & Follow Up Calls
Once an account has become past due, you can issue a written reminder to the customer to gently encourage them to pay their bill to your business. You need to be very careful with the wording you use in your debt collection letter, as the laws surrounding debt collection techniques are quite specific. Sending a written correspondence means you have a record of your attempts to collect the outstanding debt in case of future issues arising.
You may also choose to call the customer to remind them of their outstanding debt and to inquire about an estimated time frame in which payment will be made. You also need to be very careful about your wording and especially the timing of your call.
Under the Fair Debt Collection Practices Act (FDCPA), debtors are afforded certain protections. Make sure you follow these laws and guidelines, whichever methods of contact you choose.
3. Outsourcing To Third Party Collection Agencies
Sometimes it doesn’t matter what you do, some of your debtors won’t pay their debts. Even if they are going through some financial difficulties themselves, this still doesn’t help your business if they’ve already received goods and/or services in good faith, and are no longer able to pay their bills.
When you’ve exhausted all other internal avenues of debt collection options, then its time to call a third party collection agency to pursue the past due balance for you.
Collection agencies are professionals in their field of expertise. This means theyre already well aware of the specific rules and regulations that surround the debt collection industry. They are able to act on your behalf to recover any delinquent payments owing to you and the debt collection techniques they use are specifically designed to bring cash flow into your business sooner rather than later.
If you would like to make a comment, please fill out the form below.
