Effective debt collection techniques are necessary for any business, regardless of the economic climate. Knowing how to get your customers to pay their past due debts on time will increase your cash flow. After all, running a business, you have your own debts to pay. Absent an adequate cash flow, you risk falling behind on your own obligations, which leads to problems with suppliers, and/or loss of easy credit terms with your bank or lender.
Learning how to master your debt collection techniques can mean the difference between surviving and thriving for your business.
Here are the top 3 debt collection techniques to improve your business cash flow:
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 you’re within your rights to commence collection services before too much time has elapsed.
2. Written Reminders & Follow Up Calls
Once an account goes past due, you should send a reminder statement to the delinquent customer to encourage payment of the past due bill. Be careful in your letters, and use gentle language, as the laws governing debt collection techniques are quite specific. Also, by sending written correspondence means you have a record of your attempts at collecting the past due account, in case future issues arise.
You should also call the customer to remind them of their outstanding debt, as well as establish a time frame when you should expect payment. Again, your choice of words and overall communication needs careful consideration, to avoid the appearance of harassment.
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. 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.
If you’ve exhausted all other avenues of debt collection options, then it may be time to call in a third party collection agency to pursue the outstanding balance on your behalf.
Collection agencies are professionals in their field of expertise. This means they’re 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.
David Montana is a highly regarded expert, consultant, writer, and a veteran for thirty years in collection agencies solutions. He furthermore gives additional valuable tips and options about collecting debt.