20 Sep Decoding the debt collection process
When your customers owe you a lot of money, your cash flow gets blocked. Running your business requires a steady flow of cash, and any stagnancy can lead to constraints. Late invoices are standard but may be problematic if the payment keeps on delaying. Debt collection is a dynamic process and an extreme step in business. So, preventing debts from the beginning of the business deals is necessary.
Pay attention to credit policies from the start
It is often wise to create clear credit policies from the beginning of the contract signing process. Make everything clear, the payment process, the deadline, the interest charges, billing terms, and conditions, etc. It safeguards your company’s interest from the start.
Straightforward and punctual invoices
It is the essential step in the debt collection process. Make it clear via timely invoices that how and when would you like to receive your payments. When you have your invoices clear and convenient, you can expect your customers to be punctual in their payment processes as well.
Manage your accounts
When you keep track of your accounts properly, you can sort out delays in payments by calculating the time frames. This step is very crucial in identifying debts.
Identification of a problematic debt
The most vital step of the debt collection process is the identification of problematic debt. Sometimes a few of your customers may delay payment, but you need to identify those you are avoiding payment. When you understand the problem well, you will be able to find out better solutions without losing your customers. Trusted customers should not approach hastily if they delay payments a bit, but post 60-90 days things get a bit serious.
Contact via calls
Sometimes the simplest mode of debt collection can be a polite telephonic reminder. Phone calls can be hard to avoid for many debtors. Try calling more than once if required but don’t be a nudge. Also, see to it that you don’t get embarrassed in calling a debtor repeatedly if needed.
Attractive discounts to encourage faster payments
It is a strategy used by many companies to encourage faster payments by their consumers. You can offer incentives for faster refunds like attractive discounts to motivate your customers for clearing bills earlier.
Know when to hire a debt collection agency
Debt collection agencies may seem tough. But when your capital is stagnant for quite a long time, debt collection agencies do help you to get your debt back without hampering the relationship between you and your customer. Hiring a reputable debt collection agency primarily works wonders when your business lacks the time, money, or personal to handle your debt payments.
Debt collection requires specific skills like knowing the right time to call, to send letters, particular protocols, exploring the right legal options, etc. Generally, these skills may not be present within your company, and handling debt payers might become difficult for your regular employees.
The area of expertise of the debt collection agency may prove beneficial for your business.
Hiring a debt collection agency also means that you don’t have to be involved in the process. So, the relationship between you and your customer does get not hampered. The debt collecting agency will take care of the legal notice, timeframes, and litigations and serve the role of the villain here.
When a debtor avoids payment for more than 90 days, you can contact a debt collecting agency to take up the case further.
Once you assign a case to a debt collection agency, a collector is immediately assigned to the case. The collector takes all necessary steps like specifying the payment period, legal actions, litigations, etc. and continuously keeps you updated about the issue. They make sure that you get your money back.
The debt collection process consists of efforts made by the company to discourage late payments and debtors and to take professional help for debt collection finally.