3 Important Steps On How To Collect A Debt

By: David P. Montana

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.
Listed are 3 important tips that address how to collect a debt:
1. Have Clear In House Debt Collection Policies
As the owner of your business, you are the most familiar, both with your customers, and how unpaid debts negatively affect your business. Because of that unique customer relationship, it is a good idea to think about the debt recovery process at the beginning of that relationship, before a problem arises.
For instance, this means having a clearly written policy in your customer application or agreement. It should include language about when payment is expected, late fees and any additional charges, such as the cost of collections should the account 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.
At the same time, it is imperative to also have consistent and clear internal collection procedures. Whoever in your organization is responsible for collections need to know when statements, reminder letters, and phone calls need to be made. These need to be adhered to in order to be successful.
2. Know When It Is Better To Outsource To Collection Agencies
When handled consistently, you will see some success in your debt collection efforts. The larger question you need to ask yourself is whether the time and resources costs to your business is worth doing it yourself? Are your net results worth what its costing you in time, labor and money? You might be better served to consider outsourcing this to an outside collection agency.
Advantages for outsourcing your debt collections include focusing on the core, money-making functions of your business, while letting a more efficient and experienced specialty organization handle debt collecting for you. Collection agencies act on your behalf, and they're better suited to deal with debtors and are more successful.
3. Consider A Debt Collection 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.
At the end of the day, how you decide to collect your debt is yours to make. This choice should be made with costs, time and resources in mind.

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David P. Montana has been a renowned industry expert, business advisor and writer in commercial debt collection services for thirty years. He offers additional tips and resources on collecting a debt.

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