7 Top Strategies For Recovering Bad Debt
Deciding when it is time to get serious about recovering bad debts may be as simple as reviewing current procedures and systems for debt collection
. There are proven strategies to make the job less tedious and more efficient. Following these strategies will help you to make great strides in producing more positive results for controlling your bad debts and save you time as well.
Have a written policy on how to deal with bad debt Having a plan or policy about how best to deal with bad debt is an important aspect of debt control and can be incorporated as part of the regular operations for the business. A written policy could include step by step instructions including -
Setting a time limit on overdue accounts
Contacting the customer by phone
Sending reminder notices
Issuing a demand letter
Hand the matter over to a collection agency
Ensure customers understand the terms and conditions of the credit contract
Before approving a credit account with any new customer, make sure they have read and understand your terms and conditions. If a credit agreement clearly states your expectations and is executed by the customer, you have a better chance of the customer honouring your terms and paying on time.
Request a deposit before goods are received
For larger purchases and new customers that don't have a proven trade history, it is always a safe option to request a deposit or part payment for the goods before they take delivery.
Implement progress payments for services
Some industries use progress payments as normal practice. A builder, for example, will perform the work in stages and invoice at the end of completed tasks. This same principle can be applied to anyone providing services and can be a useful way to introduce a
debt recovery agency if the customer defaults at any step.
Maintain accurate records
Maintaining accurate records for all sales, services and related payments is imperative to getting your debts under control and actually preventing bad debts in the future. Therefore, in the event a debtor disputes an amount owing, you will have accurate information to back up your claim for the unpaid moneys.
Document all dealings with the customer
Documenting all phone calls, visits and correspondence with the customer will be invaluable if the account has to be settled in the legal system further down the track. It also gives you information at your finger tips when dealing with the customer at any time.
Hand the debt over to a collection agency after a given time has lapsed
It is important not to let a bad debt accumulated over time as this can have a negative effect on your cash flow and business operations. Handing the debt over to a collection agency makes good sense if you have tried without success to clear an old debt. Furthermore, debt collection agencies are experts in recovery of overdue debt. They will give you the greatest chance of recovery and also allow you to spend time on what you do best.
Prevention
If you find yourself continually having to chase debt, it could be that you need to spend some time improving your existing methods for account control. Preventing customer accounts from exceeding your trading terms could save you valuable time in the long term. Credit checks are also a useful tool to help prevent debts. These can be performed by most mercantile debt collection agencies.
by: John Zukerman
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