subject: Learn How To Collect Debt To Improve Your Business' Bottom Line [print this page] If your business has receivables, at some point you're going to need to know how to collect debt. There are a few well known principles on how to collect debt that will help you make the process go quicker and painlessly.
The first step in collecting debt is to start with gentle reminder letters and phone calls. If you're talking to a good client from whom to hope to get business in the future, a simple "I believe you may have overlooked this invoice" is a good start. If the debt has been outstanding for a while, you may need to step up your language a bit. "Upon receipt of this letter, please remit payment immediately or further action will be taken."
But maybe you can't find the debtor in order to call them or send them a letter. If their last known phone number or address isn't getting you in touch with them, try a private investigation firm or online investigation software. For less than $30 you can find the address and phone number of anyone in the United States, and often finding the debtor that's been hiding will scare them enough to get them to pay. You can also hire a collection agency that makes use of private investigators if you don't have the inclination to track someone down yourself.
When you've found the best phone number and address for the difficult debtor, the next thing you should do is to tell them that you're reporting them to credit bureaus. Of course, you have to be willing to actually do this, but there are benefits to both the threat and the action. People who care about maintaining good credit scores may pay when they hear the threat, but reporting to the credit bureaus will help you down the line as well. The homeowner who wants to get a HELOC, for example, may contact you and try to make good on their debt in exchange for you responding to the credit bureau that the debt was satisfied.
It's not uncommon for a debtor to contact the creditor at this time and try to work out payment plans. So if you're trying to learn how to collect debt, keep in mind that the credit bureaus form a sort of insurance policy for you.
Another potential way of collecting debt is offering the debtor a settlement option, whether it's directly or through an arbitrator. Getting you money quickly may make it worthwhile for you to give up some of the full dollar amount, and it may make the difference between the debtor being able to pay and it being hopeless. Sometimes a plan that benefits both parties is the best way to collect debt.
Yet another option in how to collect debt is to offer a payment plan. You may offer the debtor an opportunity to skip a few payments, pay interest only, or restructure the debt over a longer time period. This helps them out during a temporary financial crisis and helps you out in the long run because you make more money with interest.
Finally, consider the best time period in which to push your collection efforts if you're thinking about how to collect debt. After 60 days, the percentage of money you'll recover on each dollar starts to drop sharply. Taking advantage of this knowledge by taking active steps on how to collect debt during the early days will pay off greatly in the end.
