The first step taken by any company in the debt collection process is defining a strategy for pursuing debt. Before any collection calls are made, all customers should be informed of policies, both verbally and in written notification via sales terms and contracts. This up front advisory can reduce delinquent debt as well as create a comfortable relationship with the client.
A good faith debt collection call, prior to the account becoming delinquent, can aid the business and the customer in several ways. It serves as a reminder to avoid late payments while also ensuring that all internal paperwork is accurate and that all documentation to the client was properly provided. It also shows that you and your company are professional in both daily business dealings and debt collection procedures.
When delinquency does occur, it should be classified based on a system of risk assessment. This helps to organize the means by which an account should be approached with debt collection procedures, leading to greater chance of recovery and a higher bottom dollar.
Risk is determined based on the amount and type of delinquent debt. Traditionally slow-pay accounts would be classified separately from new accounts with little or no payment history. High risk and high balance accounts would follow another procedure for debt collection entirely, simply because the delinquent debt is incurred under different circumstances.
Creating a separate debt collection procedure for each classification should begin by creating a time frame for the collection process. Know when the first call to recover the debt will be made, if and when payment options will be discussed, and when the final notice demanding payment will be sent. This helps to determine the goal for debt recovery.
Use the classifications you create to prioritize debt collection efforts. Often, higher balances and those that are more than 60 days overdue are the top priorities for collection, where as smaller balances and newer delinquencies are less lucrative to pursue. Remember that creating a good rapport with customers and making the initial good faith call can aid in reducing the small balance delinquencies, since these are more often overlooked than purposely ignored.
A lot of guesswork comes into play when you haven't outlined specific procedures for debt collection. Once a plan of action is implemented with a specified timeline for results, cash flow and success will immediately improve. On the other hand, failing to provide these terms will allow customers to set their own repayment terms.
Letting delinquent debt build eats into the working capital, needed for the company to thrive. Not setting forth clear debt collection policies can easily - and quickly - ruin a business. And of course, the most important part of the plan of action to remember is that, if you don't ask for the payment, you will never see it!
A good faith debt collection call, prior to the account becoming delinquent, can aid the business and the customer in several ways. It serves as a reminder to avoid late payments while also ensuring that all internal paperwork is accurate and that all documentation to the client was properly provided. It also shows that you and your company are professional in both daily business dealings and debt collection procedures.
When delinquency does occur, it should be classified based on a system of risk assessment. This helps to organize the means by which an account should be approached with debt collection procedures, leading to greater chance of recovery and a higher bottom dollar.
Risk is determined based on the amount and type of delinquent debt. Traditionally slow-pay accounts would be classified separately from new accounts with little or no payment history. High risk and high balance accounts would follow another procedure for debt collection entirely, simply because the delinquent debt is incurred under different circumstances.
Creating a separate debt collection procedure for each classification should begin by creating a time frame for the collection process. Know when the first call to recover the debt will be made, if and when payment options will be discussed, and when the final notice demanding payment will be sent. This helps to determine the goal for debt recovery.
Use the classifications you create to prioritize debt collection efforts. Often, higher balances and those that are more than 60 days overdue are the top priorities for collection, where as smaller balances and newer delinquencies are less lucrative to pursue. Remember that creating a good rapport with customers and making the initial good faith call can aid in reducing the small balance delinquencies, since these are more often overlooked than purposely ignored.
A lot of guesswork comes into play when you haven't outlined specific procedures for debt collection. Once a plan of action is implemented with a specified timeline for results, cash flow and success will immediately improve. On the other hand, failing to provide these terms will allow customers to set their own repayment terms.
Letting delinquent debt build eats into the working capital, needed for the company to thrive. Not setting forth clear debt collection policies can easily - and quickly - ruin a business. And of course, the most important part of the plan of action to remember is that, if you don't ask for the payment, you will never see it!
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Also, explore more important facts and resources on how to improve collecting debt yourself in house, as well as collection agency options.
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