Regardless of whether you’ve been in business for just one year or a decade, one of the issues most companies do not expect to face is debt collection.
However, from the smallest microbusinesses to the largest firms, you will eventually encounter a client who chooses not to pay their outstanding balances.
As you may have heard stated before, “The best offense is a good defense.” Simply put, when you are prepared with the right business organization, it will be a much more streamlined process to turn your debt collection over to an agency.
There are four basic steps to getting started:
Make sure you have a good contract in place with your clients.
It is important to invest in the advice of an attorney to develop an airtight contract with your customers or clients. This lays out the terms and conditions of your agreements.
In essence, the bones of a good contract include details such as when you will deliver your product, what price will be paid and when payment is expected from the receiver of goods. Should your debt collection require legal action, one of the first things a lawyer will do is review the way your contract is worded.
Develop a follow up procedure for past due accounts and debt collections.
If the terms of a contract are 60 or 90 days net, it’s important to carefully monitor when payment should be received. If this is not already part of your customer software system, be sure you note it in the billing department on a calendar.
As soon as a debt is considered, “Past due,” it’s time to remind your customer that they have not yet paid you. This should be done in writing and the administrator in charge of past due accounts should keep a record of all communications with the accounts, including who was spoken to on what dates.
Know your state’s rules and regulations for debt collection.
At this point, you may also want to review your states rules and regulations for the collection of a debt. States will vary by the type of debt as well as the amount of times you may be allowed to contact a debtor.
Try multiple forms of contact for each account and document your efforts.
If your administrator is not getting a response, be sure they also try multiple forms of contact. This may include calling a main customer service number to ensure the contact name is still with the company.
Again, careful notes of the actions taken by your business should be made: Email sent requesting a follow up on Invoice #1357, voice mail message left for head of billing department, etc.
Remember that for many organizations past due accounts may represent thousands of dollars of lost revenue. Cracking down on slow pays or no pays is an immediate way to improve your bottom line.
Struggling with a past due account? Let’s discuss your debt collection agency needs. Contact us today.
