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3 Debt Collection Techniques That Will Increase The 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.

Knowing how to master your debt collection techniques can spell the difference between surviving and thriving in your business.

Here are the top 3 debt collection techniques to improve your business cash flow:

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1. Amend 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 terms of payment can mean the possibility of receiving your money sooner rather than later. It can also mean that an unpaid account becomes delinquent within a month. You are within your rights to start collection activities before more precious time has passed.

2. Written Reminders & Follow Up Calls

Once an account goes past due, you should send a reminder statement to the delinquent customer to encourage payment of the past due bill. Be careful in your letters, and use gentle language, as the laws governing debt collection techniques are quite specific. Also, by sending written correspondence means you have a record of your attempts at collecting the past due account, in case future issues arise.

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 protections under the Fair Debt Collection Practices Act (FDCPA), so make sure to adhere to these guidelines, regardless of the method of contact you choose.

3. Outside 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 professionals in their field of expertise. This means they’re already well aware of the specific rules and regulations that surround the debt collection industry. They are able to act on your behalf to recover any delinquent payments owing to you and the debt collection techniques they use are specifically designed to bring cash flow into your business sooner rather than later.

David Montana is a regarded authority, consultant, publisher, and a veteran for thirty years in debt collection agency programs. He also gives more valuable techniques and resources about collecting debt.