5 Proven Debt Collection Strategies That Improve Cash Flow To Your Business (David P. Montana)

December 16, 2009 – 9:23 pm

The most successful businesses are those that implement effective debt collection strategies. This helps them to ensure that accounts are being paid and outstanding debts are being brought in, which in turn increases the cash flow coming into the business.

While its a good idea at any time, its especially important during economically tight times to review your debt collection strategies and make sure they really are having the effect you want.

Third party debt collection agencies are professionals and they use proven tactics that yield effective results from past due debtors. Here are some of the strategies they use:

Reminder Letter

Sending a politely worded reminder letter to an overdue account holder can prove to be a very effective debt collection strategy. You may find that some customers may simply have misplaced their original bill, or the due date has slipped their minds. We all experience these types of oversights from time to time. Mailing a simple letter can remind them and you should find that many accounts holders will send in payment promptly soon after.

Reminder Telephone Calls

Taking a few minutes out of your day to call a customer with an overdue account can also be effective in reminding them of their payment obligation. While its possible to make the call yourself, you should be aware that some customers have very little regard for your business, your cash flow, or you. Its also important to remember that not all customers react nicely when asked for money. If youre certain you have the strength to face a barrage of abuse from some angry customers, then make the call with confidence.

Some customers may feel that after they’ve received the goods or services from you, they can be slow in paying you until they deem it financially suitable for them to do so. Debt collection agencies can interrupt this kind of mindset if they make the call for you. The psychological impact of hearing from a neutral third party can make them aware that the situation is far more serious than previously thought.

Demand Letters From Collection Agencies

Even after you’ve sent a number of statements and reminder notices, some customers will continue to ignore you. This is the time to hire outside collection agencies, who can employ a more stern and firmer demand letter. This can prove to be a powerful incentive to respond because of this third party impact.

Many customers fear damaging their credit rating, so the psychological thrust of being contacted by an external third party is often enough to worry many customers into action very soon after.

Skip Tracing, Another Effective Tactic

Because we live in a very mobile society, some of your delinquent customers may have changed jobs, moved to another city, or changed other contact information. These customers become very difficult for your business to try to locate.

Third party collection agencies have a far greater range of search capabilities that include databases, software and many other tools that can help them find your delinquent customers even when you cant.

Legal Options

After you’ve tried all your debt collection strategies internally, still to no avail, it still isn’t time to give up, throw in the towel, or write the debt off…not just yet. Collection agencies often have other legal options. If the case warrants, some cases can be referred to an attorney to pursue the matter legally.

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