Basic Advice About Debt Collection

As every business owner knows, at some point the need for debt collection services (either by hiring a collection agency or having employees make collection calls during the work day) arises in every line of business. Customers stop paying, one of your clients is constantly late in making their payments, and other similar situations arise regardless of how well you think you scan the credit worthiness of new clients. When it’s time to start making collection calls, you should be aware of the following basic facts:

  1. Above all, don’t wait to start making your collection effort. The longer an account remains unpaid, the less likely you’ll be successful in collecting the debt.
  2. Firm but courteous collection efforts are more likely to breed results than angry, emotionally charged or abusive ones. If you are fair and level-headed with your customer, they’ll be much more willing to work with you.
  3. While letters, emails, faxes, etc. are all good tools to use in debt collection, the majority of any collection effort should be done by phone.
  4. You should begin any collection effort with the intention to receive payment of the full amount due. Don’t go into your collection effort expecting a settlement, and demand the full amount from your customers.
  5. Generic letters and faxes are likely to be discarded or ignored. At the very least, ensure any physical communications are addressed to a specific person (either the debtor himself or, in the case of commercial collections, the owner of the business or the person in charge of paying bills).
  6. Forcing debtors into payment plans they can’t fulfill helps nobody. If the customer or debtor is suffering from cash flow issues, trying to make them pay more money than they have just stalls the collection process and further degrades the relationship between collector and debtor.
  7. Breaking debt collection laws and regulations can seriously damage the health of your
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    business. Be sure your debt collectors are well-versed in all laws pertaining to the type of debt collection they are engaged in before they make any contact with a debtor.

  8. Threatening or harassing collection efforts do not work. They alienate your customers and are highly unethical; furthermore, harassment or making threats to debtors is illegal and very strictly enforced.
  9. Being prepared when making a collection call goes a long way. Think about possible excuses you might hear from the debtor and come up with your response before you pick up the phone. Plan out what you want to say so you won’t forget anything important.
  10. Finding out the reason a customer hasn’t paid goes a lot farther than throwing around accusations. Once you understand the reasons for non-payment, you’ll be far better prepared to work with the debtor until payment is obtained.

About The Author:

Dean Kaplan is Principal at The Kaplan Group. Dean's exper­tise is widely rec­og­nized in the debt col­lec­tion indus­try. His advice has been pub­lished in a num­ber of indus­try newslet­ters such as Credit Today and InsideARM and he is a fre­quent speaker at indus­try events.