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.

Mastering these debt collection techniques often spells the difference between barely staying afloat, or thriving in your business.

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

1. Change Your Payment Terms

Be sure you have clearly stated what your payment terms are on your invoices or on any quotes you’ve provided. Many business allow 30 days or 60 days until payment is due, but have you thought about reducing your payment terms to 14 days or 21 days?

Amending your payment terms might mean the possibility of getting your money sooner rather than later. Also, it means that an unpaid account becomes delinquent earlier, and within a month. You can then commence with collection activities before more time has passed.

2. Written Reminders & Follow Up Calls

Once an account becomes delinquent, you can send a reminder notice to the customer to encourage them to pay their bill. This needs to be worded gently, and carefully in your letter, since the laws regarding debt collection techniques are very specific. Sending written correspondence also means you now have a record of your attempts to collect the past due debt in case future issues come up.

You should also call the customer and remind them of their delinquent debt, and to establish an estimated time frame to effect payment. Again, be careful in your communications, choice of wording, as well as 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. 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.

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 highly regarded authority, adviser, author, and a veteran for 30 years in debt collection agency programs. He additionally provides additional beneficial techniques and tools about collecting debt.