3 Important Rules On How To Collect A Debt
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.
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 businesses are hard pressed to find the extra time, resources and energy needed to go about the detailed work necessary for effective debt collection. This has become even more important as recent laws affecting how creditors can go after late-paying debtors have been enacted.
Here are 3 important tips that answer 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 instance, its very important to have a clearly written policy in your customer application or agreement. This needs to include when payment is expected, any added late fees, additional charges, such as the cost of collections should an account have 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 It Is Better To Outsource To Collection Agencies
If done methodically, you can see some success in your recovery efforts. The bigger question you need to ask yourself is whether the time and money costs to your business is worth doing it yourself? You could find that the amount of time, money and other resources allocated to internal debt collection too cost prohibitive. In which case, you might consider outsourcing to third party debt collection agencies.
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 Hiring A Collections Attorney
You might also consider hiring a debt recovery attorney. Collection agencies typically send written demand letters and/or phone calls. Attorneys typically have more legal tools at their disposal, including the ability to file judgments against a debtor. It should be known also that attorneys are usually more expensive to retain 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.
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 businesses are hard pressed to find the extra time, resources and energy needed to go about the detailed work necessary for effective debt collection. This has become even more important as recent laws affecting how creditors can go after late-paying debtors have been enacted.
Here are 3 important tips that answer 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 instance, its very important to have a clearly written policy in your customer application or agreement. This needs to include when payment is expected, any added late fees, additional charges, such as the cost of collections should an account have 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 It Is Better To Outsource To Collection Agencies
If done methodically, you can see some success in your recovery efforts. The bigger question you need to ask yourself is whether the time and money costs to your business is worth doing it yourself? You could find that the amount of time, money and other resources allocated to internal debt collection too cost prohibitive. In which case, you might consider outsourcing to third party debt collection agencies.
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 Hiring A Collections Attorney
You might also consider hiring a debt recovery attorney. Collection agencies typically send written demand letters and/or phone calls. Attorneys typically have more legal tools at their disposal, including the ability to file judgments against a debtor. It should be known also that attorneys are usually more expensive to retain 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.
Author:
Explore more info and tools relating to collecting debt inside of your company. David P. Montana has been a notable market place professional, industry specialist and publisher on debt collection agencies options for 30 years.