subject: 6 Tips For Debt Collection [print this page] Follow these six tips for debt collection to create a better cash flow and improve the monthly operations of your business.
Screen Potential Customers
You really don't know who you are dealing with until you have dealt with them. By screening your potential customers you are essentially protecting your future results. Utilising such credit checks on potential customers is a great way of screening potential customers.
Upfront Payment and Deposits
Taking up front payment or deposits is a great way to better cashflow and avoid debt in the future.
Collection Policy
Time spent initially on a good working collection policy that everyone can follow will save time later on. It might be as simple as listing the process of when to send invoices and how long to wait before sending follow up invoice, telephone callsand/or letters of demand.
Set guidelines for phone calls and make sure these are recorded on the customer file.
Be Clear with your Terms of Trade
Properly drafted trading terms and conditions allow you to refer to those points when it comes time to recover the outstanding debt. Debt collection can be stress fee if you have laid out the basics at the point of sale or before if you operate on issuing quotes before a sale.
If you only operate with 28 day trading accounts make sure this is spelled out in all your correspondence with the debtor.
You may also include provisions in your terms of trade to allow for any out of pocket expenses incurred in debt recovery (such as the fees of a debt collection agency) to be recoverable. Therefore, you may outsource your debt collection without being out of pocket.
Sending Invoices
E-mailing has become an accepted method of sending invoices. If there is no response from an e-mailed invoice, this gives an avenue of follow up with a posted one.
Ensure your invoices are sent within your terms of trading. There is little point waiting on a payment if the invoice didn't get to the customer until a few days of the due date.
Letters of Demand and Telephone Calls
The need for follow up correspondence cannot be stressed enough when it comes to chasing money. Send the invoice and another with a friendly reminder if the first remains unpaid. Make the phone calls and even approach the customer face to face if they are in close proximity.
When you've moved through the basic procedures to get your debt paid and still have no response a 'Letter of Demand' can achieve positive results. Be clear in what you are asking for and outline the further action you will employ if the bill is not paid. Step out all the correspondence before including previously sent invoices and phone calls.
Debt Collection Agency
For those obstinate payees that won't come to the party the debt can be referred to a debt collection agency. The companies are experts in debt recovery and well equipped to go after your money and ensure prompt payment.
Debt recovery is an important part of your ongoing business operating successfully. Be diligent and consistent with your debt collections and your efforts will pay off. The results will show in your bank balance which is always a healthy outcome.
