Effective debt collection techniques are necessary for any business, regardless of the economic climate. Knowing how to get your customers to pay their past due debts on time will increase your cash flow. After all, running a business, you have your own debts to pay. Absent an adequate cash flow, you risk falling behind on your own obligations, which leads to problems with suppliers, and/or loss of easy credit terms with your bank or lender.
Knowing how to master your debt collection techniques can spell the difference between surviving and thriving in your business.
Here are 3 important debt collection techniques that will improve cash flow in your business:
1. Amend Your Payment Terms
Be sure you have clearly stated what your payment terms are on your invoices or on any quotes youve provided. Many business allow 30 days or 60 days until payment is due, but have you thought about reducing your payment terms to 14 days or 21 days?
Amending your payment terms can mean that you could potentially be receiving your money sooner rather than later. It also means an unpaid account becomes delinquent within a month so youre within your rights to commence collection services before too much time has elapsed.
2. Written Reminders & Follow Up Calls
Once an account goes past due, you should send a reminder statement to the delinquent customer to encourage payment of the past due bill. Be careful in your letters, and use gentle language, as the laws governing debt collection techniques are quite specific. Also, by sending written correspondence means you have a record of your attempts at collecting the past due account, in case future issues arise.
You may also choose to call the customer to remind them of their outstanding debt and to inquire about an estimated time frame in which payment will be made. You also need to be very careful about your wording and especially the timing of your call.
Debtors are afforded a level of protection from the Fair Debt Collection Practices Act (FDCPA), so be sure youre sticking to the rules no matter which method of contact you choose.
3. Outsourcing To Third Party Collection Agencies
Sometimes, in spite of all your efforts, some of your customers won’t pay their debts. In spite of the fact some of your customers might be experiencing financial setbacks, this doesn’t help your business if they’ve already received goods or services from you in good faith, and now are unable to pay the bill.
When you’ve exhausted all other internal avenues of debt collection options, then its time to call a third party collection agency to pursue the past due balance for you.
Debt collection agencies are experts, and well experienced in the area of collecting past due monies. They are also fully knowledgeable of the laws, guidelines and regulations governing their industry. Representing your business, they will act on your behalf to collect the outstanding debt owed to you. The debt collection techniques used are designed to bring positive cash flow back to your business, sooner rather than later.
David P. Montana has authored, lectured and served as a business consultant on the area of collection agencies for thirty years. David would like to hear from you, and invites you to write about and share your success stories, as well as challenges, issues and concerns with debt collection techniques.
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