5 Proven Debt Collection Strategies That Improve Cash Flow To Your Business
Businesses that are the most consistently successful are the the ones that have effective debt collection strategies in place. This ensures them that past due accounts are being paid and delinquent debts are being satisfied. This increases cash flow to the business.
This is especially important because of today’s sluggish economy and recession to examine and monitor your debt collection strategies and make sure they are performing and having the desired effect.
Third party debt collection agencies are professionals and they use proven tactics that yield effective results from past due debtors. Here are some of the strategies they use:
Reminder Letter
Reminder statements to past due customers that are carefully worded are often a very successful debt collection strategy. Some customers may have simply forgotten the past due bill, or they may have misplaced it. It can and does happen to all of us. A simple reminder letter can jog their memories, and many will pay promptly.
Telephone Reminder Call
Calling a delinquent account holder to remind them of their past due bill can be effective as well. Should you make these calls yourself, be aware that some customers care little about your business, or your cash flow. Since they already know they’re delinquent, some customers could become defensive when they get your call. You can certainly do this yourself, just be prepared. However, you should always stay focused on the task at hand: settling the delinquency, ascertaining why the bill remains unpaid, and possibly working out payment arrangements.
Psychologically there are many customers who believe they have received the goods or services they wanted and the bill can wait until their own personal finances are in better order. This mind-set can be completely reversed by engaging debt collection agencies to make the call for you. People become alarmed at being contacted by a third party and will instantly believe their overdue account is far more serious than they first thought.
Demand Letters From Collection Agencies
Of course, there are still those customers who wont respond after a simple reminder of an overdue account. This is where engaging debt collection agencies to issue a firmer demand letter can become a very powerful debt collection strategy.
Many customers fear damaging their credit rating, so the psychological thrust of being contacted by an external third party is often enough to worry many customers into action very soon after.
Skip Tracing, Another Effective Tactic
Some of your past due customers may have relocated, changed jobs, or changed other contact information since the original bill. It becomes very difficult to find these customers.
Third party collection agencies have a far greater range of search capabilities that include databases, software and many other tools that can help them find your delinquent customers even when you cant.
Other Legal Options
After you’ve tried all your debt collection strategies internally, still to no avail, it still isn’t time to give up, throw in the towel, or write the debt off…not just yet. Collection agencies often have other legal options. If the case warrants, some cases can be referred to an attorney to pursue the matter legally.
David P. Montana has been a renowned industry expert, business consultant and author on the subject of collection agencies for thirty years. He provides additional valuable tips and information on debt collection strategies.
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