March 25, 2011
Solutions To Improve Your Internal Debt Collection Success Right Away!
When defining the debt collection process a company will follow, it is important to clarify strategies before the first account ever reaches collection status. Customers as well as employees should have verbal and written instructions regarding debt collection policies so that there are fewer delinquent accounts and a greater likelihood of maintaining a good relationship with customers.
A good faith call is a smart approach to debt collection, contacting the customer with a gentle reminder to pay the outstanding balance before it becomes delinquent. This also assists in checking accuracy of internal paperwork so mistakes aren’t made, as well as providing proof to clients of the business’s commitment to a professional approach in all areas.
Once a payment is overdue, it is essential to classify the account based on the perceived risk so that you can choose the proper strategy of debt collection. With a reliable method of classification, companies tend to yield a greater profit and higher success rate from debt collection procedures.
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 meaningful, different process for each type of account starts with assessing the time frame in which you expect to make progress for that collection attempt. Have a flowchart that determines when the first debt collection letter will be sent, when offers of installment payments will be extended, and ultimately when the account will be notified of final attempt to collect before being sent to a collection agency.
Know how to prioritize debt collection efforts. For example, following up on a balance of $500 that is over 60 days old is more important than a $75 balance that is 5 days old. Also, try to establish a good rapport, and work to make sure those smaller balances never become overdue. Most of these are just overlooked or forgotten, not difficult for the customer to pay. That way, debt collection efforts can focus on higher risk, higher balance accounts.
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.
This eats into the bottom line of the business, since companies thrive on cash flow. Allowing delinquent debt to remain due to unclear collection policies is a fast way to kill the business. Be sure you ask for the money. Debt collection depends on the ability to follow through, and you will never get payment if you don’t ask for it.
Lastly, 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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