Basic Facts About Debt Collection Important To Your Business
No matter what your business is or what its size is, at some point or another debt collection will become an issue for you. Following are the basics of debt collection so you can find out what you need to know in order to decide whether to handle it yourself or if you need a collection agency to help you.
The first step in debt collection is deciding whether you have the resources to handle it or if you’re better off getting a collection agency. If you choose the latter, there are different pay structures. You can sell your debt to an agency, which means that they give you a certain amount of money per each dollar owed in return for the right to collect on the rest of it. Alternately, you can agree that they will get a percentage of what money they recover. Since there’s no upfront cost to you, there’s no downside to hiring a collection agency so any business owner should consider it.
The next step in debt collection is sending letters to the debtor informing him or her of how much money they owe. They’re allowed 30 days by law to respond and dispute the facts. If they don’t respond in this time, they’re considered to have agreed that they owe the money. If they do respond, disputing the facts, then you or the debt collector need to show them proof of the debt.
Next you want to report the delinquent account to a credit bureau. Sometimes merely threatening this makes consumers who care about their credit rating pay up. If it doesn’t, you or your collection agency still need to report the debt to the credit bureau. Down the road when the debtor needs a loan they may come to you and try to work it out in exchange for removing the delinquent report, so it’s insurance that the debt will be paid.
After reporting to the credit bureaus, a professional collection agency will use private investigation techniques to make sure they have all possible phone numbers and addresses for the debtor. If you have to do this yourself, there are sites online where you can locate them if you have a previous address.
Finding the debtor when he or she is trying to hide can be very intimidating and often is enough to get him or her to pay up on what they owe you. Most debtors try to avoid calls from debt collectors, and when they realize this strategy won’t work they start to become amenable to resolving the problem.
The reasons to do this are many. First, if you can’t get the debtor on the phone, it’s impossible to work out payment arrangements with him or her. The other thing is that some debtors, when they learn they can’t hide from you, become much more amenable to working things out in order to stop the collections calls and letters.
There’s a lot to be said for getting a partial settlement right away, because the more time goes on the less likely it is that you will recover the debt. However, if you work out a payment plan you’ll also make more money on interest over time, so this is a perfectly legitimate resolution to debt collection problems as well. Either way, using debt collection techniques that debt collectors use will help you get more of your money back.
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