Use These Top 3 Debt Collection Techniques To Improve Your Business Cash Flow

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.

Learning how to master your debt collection techniques can mean the difference between surviving and thriving for your business.

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

1. Change 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 you’re within your rights to commence collection services before too much time has elapsed.

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 may also choose to call the customer to remind them of their outstanding debt and to inquire about an estimated time frame in which payment will be made. You also need to be very careful about your wording and especially the timing of your call.

Under the Fair Debt Collection Practices Act (FDCPA), debtors are afforded certain protections. Make sure you follow these laws and guidelines, whichever methods of contact you choose.

3. Outsourcing To Third Party Collection Agencies

Sometimes no matter what you do, your debtors still won’t pay their debts. Even if they are experiencing severe financial hardship of their own, this doesn’t help your business if they’ve received goods or services in good faith and then suddenly found themselves unable to pay the bill.

If you’ve exhausted all other avenues of debt collection options, then it may be time to call in a third party collection agency to pursue the outstanding balance on your behalf.

Debt collection agencies are experts, and well experienced in the area of collecting past due monies. They are also fully knowledgeable of the laws, guidelines and regulations governing their industry. Representing your business, they will act on your behalf to collect the outstanding debt owed to you. The debt collection techniques used are designed to bring positive cash flow back to your business, sooner rather than later.

David Montana is a well known specialist, consultant, publisher, and a veteran for 30 years in debt collection agency options. He also gives additional useful strategies and options on collecting debt.