Setting up debt collection strategies and processes should be a step taken prior to the actual need for collection calls. Every customer should be aware of these policies, made clear both verbally and in the terms of sale of goods or services. Being up front about debt collection procedures can aid in stopping delinquent debt, as well as maintaining a healthy 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.
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 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.
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.
Having such strategies for debt collection spelled out to follow removes the guesswork, and improves the cash flow and financial success of the efforts. By not implementing a specific plan of action, the customer is allowed to make their own terms for repayment, or lack thereof.
This only causes a deficit in working capital for the company rather than the cash on which the business operates. Losing money due to unclear debt collection practices can quickly cause a business to fail. Even more detrimental to success is being timid - so never be afraid to ask for the payment, or you may never get it.
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.
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 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.
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.
Having such strategies for debt collection spelled out to follow removes the guesswork, and improves the cash flow and financial success of the efforts. By not implementing a specific plan of action, the customer is allowed to make their own terms for repayment, or lack thereof.
This only causes a deficit in working capital for the company rather than the cash on which the business operates. Losing money due to unclear debt collection practices can quickly cause a business to fail. Even more detrimental to success is being timid - so never be afraid to ask for the payment, or you may never get it.
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