Successful Debt Collection Techniques Explained
Successful Debt Collection Techniques Explained
Regardless of whether you are owed money from a friend or a customer, it is vital to recover it as soon as possible.
Ensuring that people pay on time can often be challenging, and there will always be those that seek to avoid making payment no matter what.
A stable cash flow is vital to maintaining a good financial position. For a private individual, not being paid may make it difficult or even impossible to pay your own bills. For a business, a bad debt might put the enterprise at risk.
Debt recovery is something that must be done, but it can often be a challenge to know exactly what to do. For example, is it better to go straight to a professional, or try to contact the debtor and resolve the matter alone?
Frontline Collections is the UK’s leading private debt collection agency. Since 2005, we have helped thousands of businesses and private individuals recover millions of pounds worth of outstanding debt.
We asked our recovery experts for advice on successful debt collection techniques, as well as an effective collection process.
How to Collect Debt Effectively
The key to recovering money is to have a good debt collection strategy. Many people are unsure of what is appropriate or legal when recovering a debt, and it is important to research what is acceptable.
As well as this, it is important to recognise when a specific method is not working. For example, many larger companies task their accounts receivable departments with recovering a debt. If this process carries on for too long with no successful result, it can cost the business too much.
Here are some of the most successful debt collection techniques that are recommended by debt collectors.
Be Professional When Speaking with the Debtor
Being owed money is always a stressful and frustrating experience. Business owners often feel let down by customers that withhold payments, and private individuals are hurt by people that do not repay them.
As such, emotions can often get the better of people during the debt collection process, and discussions can easily turn into arguments.
Even though it is hurtful to be owed money, you must always maintain a professional tone when speaking to the debtor. This should always be done, regardless of whether you are making collection calls, writing an email to the debtor or sending a letter.
During the first stages of successful debt collection techniques, the debtor must be contacted to remind them of their obligation. During this conversation, you should professionally and clearly state what is owed and that it is now due. If possible, this should be done in writing and sent via recorded postal delivery.
Charging Late Payment Interest, and Setting Payment Terms
One common way that is used to encourage people to pay on time is to include late payment interest charges. Companies put this into payment terms that are explained at the beginning of new agreements. If payment is made late, a small interest charge is added. This gives customers a good incentive to pay, as early payments will be interest-free.
Payment terms are good to create, for both businesses and private arrangements, as a debtor will be aware of the consequences of not paying. It is also useful if the case ever needed to be escalated, as they will have acknowledged that they understand what their payment obligations are.
Set Up a Payment Plan
In some cases, debtors may be unable to pay the full amount of the debt. In this case, it is often a good idea to propose a payment plan. With this, the debtor can make a series of partial payments that spread the total cost across manageable amounts.
This is often a successful debt collection method and it helps resolve the matter amicably. For a business, this is even more important, as the customer is more likely to return to you. This will allow you to benefit from more revenue from the same customer.
Seek Professional Assistance
In some cases, it is better to contact a professional. It may be the case that you have done all you can do from a debt recovery perspective, and an experts input is needed. Or, you may need to contact them as soon as possible due to. For example, you may have a delinquent customer that needs tracing, and a specialist agency is needed to do this.
There are many professional solutions for debt recovery, and the most beneficial solution is provided by a debt collection agency.
Frontline Collections provides a low cost and effective service. We utilise successful debt collection techniques to achieve our leading average debt recovery rate of 90% on undisputed debt.
Speak to one of our friendly debt collection experts today for a free pre-action assessment.