If your business’s debt collection and recovery processes are inefficient, this will cause a lot of time to go to waste as well as a lot of effort on something that does not yield as high returns. Therefore, the overall productivity and hence the cash flow of your business will be weak when compared to alternative options. Therefore, certain steps should be followed in order to have better debt collection services and better debt recovery services by your organization in order to thrive.
1) Delegate someone in your organization to be a specific “Debt Collections Officer”
Regardless of whether this person is someone from within your organization or someone external that you hire in order for this specific purpose, your business needs a debt collections officer in order to ensure that the process is efficient and streamlined as a whole. If your business faces the problem of having multiple bad debtors having numerous bad debts, there will be a higher need to employ a full-time debt collections officer as dedicated personnel in order to take responsibility for this function. Alternatively, you can hire an external debt recovery service provider who will ensure that your debt collection and recovery process is efficient. In case the debts are piling up, you can consider hiring a debt collection agency.
2) Perform proper screening of your potential customers in order to gauge them
Identifying your customers beforehand and knowing their credit history or even their financial capability at present will be enormously helpful in order to ensure that your high-value goods and services are safely returned to you in some form. For B2B situations, screening of the organization is required. For B2C situations, customer details are required in order to double check the details given for various databases.
3) Incentivize customers if they pay early
One of the most effective incentives that you can give your customers is a discounted price. However, there are other, more creative ways in order to incentivize customers that would be appealing to them while not drilling a hole in your organization’s pocket. These incentives will also help your business have recall in the mind of the customer in order to foster long term relationships for further transactions.
4) Make an attempt to talk to the debtor directly
Rather than using social media, email or SMS mechanisms to talk with the debtor, use verbal media in order to ensure that both you as well as the debtor are on the same page. A good communication tactic will increase the chances of repayment of debts.
5) Set realistic and specific contracts and terms that are transparent, clear and accessible
With the advent of cloud based online document management tools, it has never been easier to achieve this goal. Setting transparent and realistic contracts is now cost-effective and easy. Having a debt collection and recovery expert will also help ensure that the contract is achieving the requirements of your business.
6) Maintain your aura of professionalism as well as positivity wherever possible
Make sure to be professional even when you are frustrated by customers not repaying their debts for a while. Act civil and positive with the debtor during the recovery process so that the debtor feels at home and is more willing to repay their debts. Never threaten the debtor. Offer alternative payment options in order to increase the convenience of the debtor. Legal action can be used but only if all other options fail. Show some empathy and it will go a long way in order to maintain relationships with your customers.
7) Ensure that the debtor signs a written commitment for payback
A written commitment from the debtor saying that they will repay their debts is highly beneficial if the situation ever escalates to a position where legal interference is necessary. Written proof will help you in order to swing the court to your side during resolution proceedings in court.
8) Make sure to have proper documentation and invoicing procedures that are automated
The process of documentation and access of documents should be available to all people who are involved in your business transactions – this includes the debtor. This would ensure a systematic debt collection process that is streamlined in nature.
9) Maintain proper records of any communication with the debtors
Logging of all contact with debtors is important, especially for written communication. This is because legal proceedings will require this information in order to decide the case. With the advent of cloud-based relationship management tools, record keeping is a cakewalk.
10) Take your losses and move on if the situation calls for it
In case of smaller debts, it may be better to pull the plug rather than going for legal proceedings as the costs of these proceedings may offset what you gain from the repayments.