by Drew Matthews
Effective debt collection techniques are necessary for any business, regardless of the economic climate. Knowing how to get your customers to pay their past due debts on time will increase your cash flow. After all, running a business, you have your own debts to pay. Absent an adequate cash flow, you risk falling behind on your own obligations, which leads to problems with suppliers, and/or loss of easy credit terms with your bank or lender.
Knowing how to master your debt collection techniques can spell the difference between surviving and thriving in your business.
Here are 3 important debt collection techniques that will improve cash flow in your business:
1. Alter Your Payment Terms
Make sure you've clearly stated on your invoices, and any quotes you've provided, what your payment terms are. Most businesses allow 30 to 60 days before payment is due, but have you considered reducing your payment terms to 14 or 21 days?
Amending your payment terms can mean that you could potentially be receiving your money sooner rather than later. It also means an unpaid account becomes delinquent within a month so you're within your rights to commence collection services before too much time has elapsed.
2. Written Statement Reminders & Follow Up Calls
Once an account becomes delinquent, you can send a reminder notice to the customer to encourage them to pay their bill. This needs to be worded gently, and carefully in your letter, since the laws regarding debt collection techniques are very specific. Sending written correspondence also means you now have a record of your attempts to collect the past due debt in case future issues come up.
You should also call the customer to remind them of their outstanding debt, as well as establish a time frame when you should expect payment. Again, your choice of words and overall communication needs careful consideration, to avoid the appearance of harassment.
Under the Fair Debt Collection Practices Act (FDCPA), debtors are afforded certain protections. Make sure you follow these laws and guidelines, whichever methods 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 experts, and very experienced in this area. It also means they're knowledgeable of the the laws and regulations governing the debt collection industry. They will act on your behalf, representing your business, to collect any past due payments owed to you. The debt collection techniques they use are designed specifically to bring positive cash flow back into your business, sooner rather than later.
Drew Matthews is a established specialist, consultant, writer, and a veteran for thirty years in <a href="http://www.debtcollectionsteps.com/business-debt-collection.html">business debt collection</a> solutions. He also provides more beneficial techniques and options about <a href="http://www.debtcollectionsteps.com/commercial-collection-agencies.html">commercial debt collection</a>.
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