Debt Collection Solutions – Collecting and Minimizing Costs
Best Debt Collections Strategies
There is a growing army of debt collectors pursuing an increasing number of debtors who owe a growing amount of dollars. Complaints about debt collection practices and debt collection agencies are expected to rise perhaps by as much as 20 to 40%. The attitude toward debt collectors is often surly and political pressure may enforce ethical approaches to debt recovery. If you have debts to collect, you’ll need better collections strategies than have been used formerly.
Aggressive collection agencies which get paid on commission might use any collections tactic and means available to them. They may not be concerned about your long term relationship with your customer. They may alienate you from your customer. Since customer loyalty is a priority, you need to work with a debt collection agency that has a more gentle approach to collections.
Debt collection is a huge industry and serves a vital component of ensuring business cash flow is maintained. Often debtors will sway from their responsibility to pay on time and debt collectors make contact to get payments coming in. Although we like to think consumers and businesses alike will pay the debts on time, in fact they will pay those bills that are most pressing. That means those companies who don’t manage their bill collections will find their customers getting too far behind in payments.
When bills go unpaid for a long time, it can cause the lender/seller some financial discomfort. That company’s bills may begin to be unpaid and a vicious cycle of non-payment or delinquency is set into play. Before your accounts receivable reach specific milestone dates, you want to make contact with the non-payer. There a variety of ways you can approach the person or company owing the funds. A tried and tested approach that gets bills paid without causing conflicts is perhaps your best option. If other companies have found that this approach works, you may avoid your own trial by fire methods, or the aggressive tactics used by many collection agencies.
Collection Agencies – Experience Counts
Collection agencies have found that certain overdue dates are very important. Typically beyond 180 days, collections gets a lot tougher. It is better to deal with debts effectively before 180 days and before other key lengths of time.
Collections Letters and Dedicated Collectors
There are typically 2 different ways to collect debts. One is to phone the person or company owing you payments. If this doesn’t work, you can hire a collections service. When a company or person learns that a third party collection agency is now involved, they are typically more interested in paying. They know their credit rating might be affected and their debt has now reached an embarrassing situation. Having a collection agency call on you is a humiliating experience and that sense of humility can get them to start paying the debt.
While recovery of the debt owed is the end goal, you may need to collect in partial payments. The point of doing it this way is because once the indebted person starts paying, they become more conscientious about paying it off. They’ll be relieved when they do. You want these normal psychological forces in play to help you recover your money.
Some agencies or service will offer flat fee collections services. That means you pay one low fee for collecting on an account or to collect a number of outstanding receivable accounts. This is a great way to save money. These services offer information on how to collect and provide effective collections letters to help you collect debts.
If the gentle approach doesn’t get the results you need, then you can hire dedicated debt collectors. These are actual trained professionals who work on tough accounts that require human intervention. The debt collector will work more closely with the company or person to get action. Just because your account has gotten to this stage doesn’t mean you’ve lost this company as a customer. It simply means they are going to work harder with them to get payments coming.
If the collection agency can collect on 50% of the debt, that may be far preferable to collecting nothing. If an agency charges 20% to 50% of the collected amount, it may be worth it in today’s difficult times. Bankruptcies are at alarming rates. That’s why it’s smart to get active on your overdue accounts and not let them get too far. Unfortunately, it is inevitable that you will have lots of these delinquent accounts. It may be wise to use a collections service to ensure you get your payments before that person pays their other dates. It’s your hard earned money so put your needs first.
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