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Golden Rule of Debt Collection

Debt collection often becomes a big challenge for small businesses. They lack the skills to communicate effectively with clients to convince them to pay, which hits their bottom-line. A common mistake businesses make is to ease off the pressure, which makes customers believe they may delay or juggle payments.

Regardless of the collection efforts made, a rule which always applies is to stay on the account until getting paid. Businesses need to be prompt in sending the bills and monthly re-bills. Rather than waiting for the end of the month, notices must be sent once an account is overdue.

Being prompt doesn’t mean harassing the debtors. However, people owing money must know that the creditor is following the matters closely. A creditor need not dispatch a string of messages daily to the debtor. A phone message a day is enough to keep them on tenterhooks. The messages may be polite and may not contain an iota of threat, yet they will contribute in keeping the pressure.

When calling debtors, the calls must be short and specific. The tone should be calm, yet should maintain a sense of urgency about getting paid. The caller should come across as a professional and avoid talking about anything personal.

A customer may have genuine financial problems and if they really do not have money to pay, no amount of insistence will do. The approach in such matters should be to ask them what amount they can realistically afford to pay. The payment may be rescheduled if the customer agrees to it in written.

Along with the contact on phone, a series of letters must also be sent to the customer, slowly escalating in intensity. The creditor must save the copies of the correspondence along with the notes of telephonic conversations.

One way to encourage the debtors to settle the debt is to offer them a deep discount on immediate repayment. If an account is fairly large and a business is doubtful about ever collecting the debt, better option is to take the maximum possible amount from the debtor and settle the matter.

If none of the above methods work and a business simply lacks the means to pursue a case, it is better to take on board professional collectors. Well versed with every aspect of debt recovery, they can use their expertise to boost debt collection. There are global debt recovery firms which can offer services outside the national boundaries. If a business’s debtor has settled in another country, hiring an agency may be the right step.

Debt Collection – Understanding the Reason for Non-payment

Before you begin working on a past-due collection account of a customer, understanding the reason for non-payment is important. This will help you determine the most effective action, increasing the odds of successful collection.

All customers you deal with can be divided into four types –

Willing and Able – Getting the dues from these customers will be the least troublesome as they have the resources to pay the outstanding invoices along with the will. They may be in debt because of some error such as not receiving the invoice mail. Most often, you just need to contact them and they will pay.

Unwilling but Able – These are the customers, who have the resources to pay, but are unwilling to cough up the money. The reason may be some dispute regarding the balance owed or dissatisfaction with the product or service. If that is the case, you can work on finding an acceptable solution to the dispute, which can lead to payment. In some cases, the customer may feel that the creditor lacks the means to catch up with them. If they are convinced about the means at your disposal to eke out the debt, they will repay.

Willing but Unable – This is the category of customers who have no intention to sit on the debt, yet they cannot settle the debt for financial reasons. They would acknowledge the bill but would convey their inability to pay the whole balance. You may work with them to come to an agreement on a payment plan.  Working out a payment plan is usually the most helpful option for this customer.

Unwilling and Unable – Such customers are usually the most difficult to work with. They may simply not respond to any attempt to contact them. Even when they do, they may simply refuse to pay, or just say that they are unable to do so. Getting them to pay the outstanding amount will require some persistent efforts on your part. If necessary, you may also have to initiate legal action.

A professional debt recovery company in the UK may help in the collection of debt. Leveraging expertise in the field that a business usually lacks, they can collect debt from bad accounts.