3 Debt Collection Techniques That Will Greatly Increase Cash Flow To Your Business

Effective debt collection techniques are necessary to any business, regardless of the state of the economy. Knowing how to persuade your customers to pay their delinquent, past due accounts on time will increase cash flow to your business. After all, as a business owner, you have debts to pay as well. Absent the necessary adequate cash flow, you are risking falling behind on your own bills and commitments. This can lead to problems with your vendors and suppliers. Or to the loss of favorable credit terms with your banker or lender.

Mastering these debt collection techniques often spells the difference between barely staying afloat, or 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 youre within your rights to commence collection services before too much time has elapsed.

2. Written Statements-Reminders & Follow Up Calls

Once an account has become past due, you can issue a written reminder to the customer to gently encourage them to pay their bill to your business. You need to be very careful with the wording you use in your debt collection letter, as the laws surrounding debt collection techniques are quite specific. Sending a written correspondence means you have a record of your attempts to collect the outstanding debt in case of future issues arising.

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.

Debtors are afforded a level of protection from the Fair Debt Collection Practices Act (FDCPA), so be sure youre sticking to the rules no matter which method of contact you choose.

3. Third Party Collection Agencies

Sometimes, in spite of all your efforts, some of your customers won’t pay their debts. In spite of the fact some of your customers might be experiencing financial setbacks, this doesn’t help your business if they’ve already received goods or services from you in good faith, and now are unable to pay the bill.

When you’ve exhausted all other internal avenues of debt collection options, then its time to call a third party collection agency to pursue the past due balance 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.

David P. Montana has authored, taught and worked as a business consultant on the subject of collection agencies for three decades. David would like to hear from you, and invites you to write about and tell your success stories, as well as challenges, frustrations and concerns with debt collection techniques.