“Implementing procedures for debt collection long before the first payment is late is the key to successful recovery of credited funds. Creating policies and procedural outlines related to debt collection is part of the financial foundation of the company, and divulging the terms of service to clients should include written notice of these practices.”
All debt collection should appear in writing for the client, just as any other contractual agreements are represented in paperwork. This helps to define the company’s strategy and makes sure all debt collection efforts are justified in the eyes of the client. This improves return on debt collection efforts in the future.
To ensure the greatest benefit by maintaining a good, healthy relationship with the customer, a business may also consider implementing a goodwill collection call policy. This is a call that is made before the terms of the sale expire and the debt becomes overdue. This helps with quality assurance for the company, verifying invoicing and documentation are correct, as well as a good faith reminder to the client.
Of course, once payments are overdue, it is essential to take immediate action toward debt collection. Severely delinquent accounts are harder to collect on and only serve to weigh down the financial records. The best way to assure rapid success of debt collection is to classify each delinquent account based on its circumstances.
For instance, you would not pursue a debtor who frequently pays on his or her account slowly the same way as someone who incurs a large amount of debt once and never repays. Each account should be viewed individually, with particular procedures followed for each categorization of debt.
When creating the process for debt collection of each type of account, start with a time frame in which collection efforts are expected to be handled. For example, for high risk debts (with high balances), collection efforts should begin early and, if necessary, include steps to implement a payment plan to recover lost funds. By contrast, a slow paying account could be suspended until all payments are up to date.
Another way to reduce the amount of unpaid debt on the books is to place more focus on new accounts that have not been the basis of the company’s clientele and financial structure for a long period of time. These accounts can be suspended or canceled for lack of payment without detrimental consequences to the company’s bottom dollar. This also cuts back on future need for collection efforts with habitually late payment.
In order to generate proper cash flow, it is imperative to know the types of delinquent accounts with which the company is working and how to handle each one properly. Implementing a debt collection strategy prior to having any delinquent accounts can easily accommodate those needs and help to ensure faster delivery of payment from all clients.
Source: Articles Directory
About Kollect Systems
Kollect Systems is an innovative tech platform provider with BankTech and FinTech software solutions which leverage AI based decisioning and workflow technologies to help lenders perform Debt Collections & Recovery (BankTech) processes effectively and for mid-size to large scale enterprise companies (FinTech), to automate Receivables, e-Invoicing & Payments better.
Kollect’s Solutions :
- KollectApps for Lenders (BankTech)
- KollectValley for Finance (FinTech)
- Data Integration & Analytics
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