Collecting debts is arguably one of the most exhausting and laborious tasks every business owner must face in order to run a profitable business. Neglecting those past-due accounts can negatively impact your cash reserves, placing your business at risk of underperforming.
According to a U.S. Bank study, 82 percent of businesses today fail due to poor cash flow management. Your cash flow serves as the lifeblood of your business that enables you to buy inventory or pay your employees. In other words, losing the stability of your cash flow is an easy way to hinder the growth of your business or even worse, put you out of the competition.
So, if you’re new to the world of commerce and have no experience in dealing with debts, you should be aware of several do’s and don’ts in the world of debt collecting:
Do’s of Debt Collecting:
DO ask some help from a debt collection agency.
Many businesses believe that it could be cheaper if they simply just collect the debts all by themselves, but this is a clear misconception.
Apart from being a riskier option, collecting your own debts forces you to invest some of your most valuable resources and time in chasing after debtors, without any assurance that you will be able to successfully recover the money owed. However, if you are willing to seek the help of a professional debt collecting agency, you could save yourself time and money as a reputable debt agency already possess the necessary skills and tools to get the job done.
DO take advantage of mail, e-mail, and phone to stay in touch with debtors.
It is highly vital for you to establish a solid line of communication between you and your customers, especially those who have unpaid debts. It may be a difficult task indeed; however by not keeping in constant contact you may encounter many unknown surprises or disputes that could have been resolved early in the account recovery process. But using phone conversations, letters, and emails as a medium, you can establish strong business practice and professionalism on your part as the business owner.
DO formulate a plan for dealing with any collection issues beforehand.
Preparedness is always the key when it comes to dealing with any negative situations associated with business management, and debt collecting is no exception. You must create a plan to be implemented on those delinquent accounts before they even emerge. This plan can include a credit management or application that gives certain provisions such as directors guarantee’s which can be very handy in the occurrence of any litigation in the future.
Don’ts of Debt Collecting:
DON’T resort to any threats or harassments to collect a debt.
Remember that even though recovering your money is the main priority, there are still laws that protect anyone from any form of potentially harmful behaviors such as threats, intimidation or harassment.
Here are some of the things you should NEVER DO when collecting debts as they are strictly prohibited under Australian law:
- Using physical force or coercion
- Harassing the debtor to an unreasonable extent
- Taking advantage of the debtor’s vulnerability, disability, or any similar circumstances.
As a business owner always keep these in mind as even debt collecting agencies are well-governed by these debt collection guidelines.
DON’T try to recover your debts without any prior knowledge of the local collection laws and regulations.
Collecting debts is not a straight forward process. This industry involves a set of debt collection guidelines and regulations that can vary from country to country and sometimes state to state. Lack of knowledge regarding these laws can make it easy for well-informed debtors to take further action against you the business owner, if they identify a guideline has been breached.
DON’T play the waiting game.
Letting those past due accounts hanging is most certainly a risky approach to take. Recent statistics regarding debt collection show that the odds of successfully recovering a debt decrease the more time you play a waiting game. On average, there is roughly a 25% chance of recovering a debt if you tried to collect it 12 months after the account is past due. So, make sure you deal with your debts as soon as possible to ensure your business has the best chance for a successful recovery.
There are a lot of things that you need to learn about the practice of debt collecting. With proper guidance and knowledge of the basic do’s and don’ts of debt collection, you can now minimize the occurrence of issues that can affect the current condition of your business.
Brodie Collection Services is a full-service agency offering a multitude of services and is one of Australia’s leading debt collection firms. Our objective is to provide you with expert debt recovery and advice at a price lower than the market cost. Our recovery approach is simple – we strive to get to the bottom of why you’re not being paid, then implement steps to ensure prompt payment. With 25+ years’ experience in debt recovery, we have undeniable results proving that debtors will pay once we become involved.
With offices in Melbourne, Adelaide, and Brisbane, we can assist with all your collection & recovery, legal support services, and credit risk management requirements.