Cash Flow Problems? Use These 3 Debt Collection Techniques To Increase Your Bottom Line
Effective debt collection techniques are a necessity for businesses in any economic climate. Knowing how to encourage your customers to pay their outstanding debts to you on time can increase your cash flow. After all, your business has its own debts to pay. Without adequate cash flow, you could be risking falling behind with your own bills, which could lead to problems with suppliers or loss of easy credit terms with your bank or lender.
Mastering these debt collection techniques often spells the difference between barely staying afloat, or thriving in your business.
Listed are the top 3 debt collection techniques that will increase cash flow to your business:
1. Alter 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 might mean the possibility of getting your money sooner rather than later. Also, it means that an unpaid account becomes delinquent earlier, and within a month. You can then commence with collection activities before more time has passed.
2. Written Statement Reminders & Follow Up Calls
Once an account has become past due, you can issue a written reminder to the customer to gently encourage them to pay their bill to your business. You need to be very careful with the wording you use in your debt collection letter, as the laws surrounding debt collection techniques are quite specific. Sending a written correspondence means you have a record of your attempts to collect the outstanding debt in case of future issues arising.
You should also call the customer and remind them of their delinquent debt, and to establish an estimated time frame to effect payment. Again, be careful in your communications, choice of wording, as well as 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. Outside Collection Agencies
Sometimes it doesn\’t matter what you do, some of your debtors won\’t pay their debts. Even if they are going through some financial difficulties themselves, this still doesn\’t help your business if they\’ve already received goods and/or services in good faith, and are no longer able to pay their bills.
After you\’ve exhausted all internal efforts and avenues of debt collection, its then time to contact a third party collection agency to pursue the outstanding account for you.
Collection agencies are professionals in their field of expertise. This means theyre already well aware of the specific rules and regulations that surround the debt collection industry. They are able to act on your behalf to recover any delinquent payments owing to you and the debt collection techniques they use are specifically designed to bring cash flow into your business sooner rather than later.
David P. Montana has written, taught and worked as a business consultant on the subject of collection agencies for thirty years. David wants 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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