The process of collecting debts effectively, whether commercial or consumer requires patience and intensity. The best debt collectors have developed their skills over years of experience, learning the strategies aim to push the debtors towards making payments. For new collectors who haven’t yet developed their skills on debt collecting process, there are some simple strategies to get started.
Guidelines of a debt collector:
The most crucial thing for a new collector is to remember while contacting debtors not to use abusive language or aggressive collection techniques. This is a common mistake a collector can make. Collectors should never threaten or blackmail a debtor during the collection process. While contacting the debtors, it is mandatory to demand precise action. The debt collector should set specific deadlines for payments and if the due goes beyond the deadline contact the debtor the next day.
The debt collectors should make reasonable demands to the debtors. The debt collector should find out the reason for the delay in payment and utilize the information to develop a solution to the problem satisfying both the debtor and the creditor. If a debtor cannot afford to pay the money, there is no point in forcing the debtor to pay the whole amount in one go. The debtor is likely to get more frustrated, and the creditor does not receive anything. The solution is to create a payment plan to initiate the flow of money to the creditor which does not force the debtor into financial trouble.
Effective strategies for debt recovery:
- Have a written policy on how to deal with a bad debt: Having a plan on how to deal with a bad debt is an important aspect of debt collecting. The written policy includes the following step by step instruction.
- Setting a time limit
- Contacting the client by phone
- Sending reminder notices
- Issuing a demand letter
- Handing the matter over to a debt collecting agency
- Make sure the customers understand the terms and conditions of the contract: Before approving a credit account make sure the client has read the terms and conditions, you will have a better chance of the customer honoring the terms and makes the payment on time.
- 3. Request for a deposit before the goods are received: For larger purchase and new clients that don’t have a proven trade history, it is safe to request for a deposit or advance payment of the goods.
- Implement progress payments for services: Some industries use progress payments as normal service.
- 5. Maintain accurate records: Maintaining perfect records of all the transactions help in preventing bad debts.
- Document all dealings with the customers: Documenting phone calls, visits, dealings with customers will be invaluable if the account has to be settled legally.
- Hand the debt over to a collection agency if the time limit is exceeded: It is mandatory not to let a bad debt stay for a long period of time. Handling the debt over to a collection agency is a wise thing to do. The collection agencies are experts in the recovery of overdue debts.