5 Debt Collection Strategies That Will Improve Your Business’ Cash Flow

Businesses that are the most successful are the ones that use effective debt collection strategies. This enables them to know that accounts are being paid and delinquent debts are being satisfied. This improves cash flow to the business.

While its a good idea at any time, its especially important during economically tight times to review your debt collection strategies and make sure they really are having the effect you want.

Third party debt collection agencies are professionals and they use proven tactics that yield effective results from past due debtors. Here are some of the strategies they use:

Reminder Letters

Reminder letters to delinquent customers that use polite language are often very successful as a debt collection strategy. Many times its a simple case of having either having forgotten the past due bill, or that it has been misplaced. In either case, a simple polite reminder statement can jar their memories…most will pay promptly.

Reminder Telephone Calls

Calling a customer to remind them of their delinquent account can sometimes prove effective as well. However, if you make the call yourself, you should be aware that some customers have little interest in your business or your cash flow. As many of these customers already know they’re delinquent, some may not respond nicely when you call asking for money. If you’re prepared to deal with this, then you can do so. It’s important to remain focused on the task at hand: getting at the problem why the account remains unpaid, when to expect payment, and/or possibly offer payment arrangements.

Some customers may feel that after they’ve received the goods or services from you, they can be slow in paying you until they deem it financially suitable for them to do so. Debt collection agencies can interrupt this kind of mindset if they make the call for you. The psychological impact of hearing from a neutral third party can make them aware that the situation is far more serious than previously thought.

Collection Agency Demand Letters

Even after you’ve sent a number of statements and reminder notices, some customers will continue to ignore you. This is the time to hire outside collection agencies, who can employ a more stern and firmer demand letter. This can prove to be a powerful incentive to respond because of this third party impact.

Many customers fear damaging their credit rating, so the psychological thrust of being contacted by an external third party is often enough to worry many customers into action very soon after.

Skip Tracing, Another Effective Tactic

Because we live in a very mobile society, some of your delinquent customers may have changed jobs, moved to another city, or changed other contact information. These customers become very difficult for your business to try to locate.

Collection agencies have an arsenal of resources, software, tools, databases and other options at their disposal that make them far more efficient and effective at finding otherwise unreachable delinquent customers.

Other Legal Options

After you’ve tried all your debt collection strategies internally, still to no avail, it still isn’t time to give up, throw in the towel, or write the debt off…not just yet. Collection agencies often have other legal options. If the case warrants, some cases can be referred to an attorney to pursue the matter legally.

David P. Montana has been a recognized industry expert, business consultant and author on the subject of collection agencies for thirty years. He provides more valuable tips and information on debt collection strategies.