From utilities to property management to healthcare to construction, a variety of companies have delinquent accounts for a variety of reasons. Whether it’s from a lack of knowledge, a lack of desire, or a lack of finances on the debtor’s side, unpaid debts can quickly pile up for a company.
However, it doesn’t matter what industry the debt belongs to or why the debt exists. Because at the end of the day, it boils down to one issue: can you collect the debt or not?
With a proper debt recovery strategy, debt collection is not a lost cause. In fact, with the right tools, resources, and skill, recovering debt can be an extremely successful facet of your business.
Let’s take a look at 5 things that should be wrapped up in your debt recovery strategy.
Analyze and justify
When considering unpaid accounts, it’s important not to take a one-size-fits-all approach. Instead, you must ask yourself the question:
What does it cost to collect a debt and does the recovered amount outweigh that cost?
While in the initial stages of debt collection, it’s okay to look at each account the same way. But this should not last forever. Eventually, you’ll need to develop a process to manage accounts that aren’t worth as much and/or cost more to manage. If you don’t, you’ll end up spending more money to collect debt than your actual recovered debt is worth.
At the same time, you need to consider external circumstances and client situations. This is becoming more important than ever, given the current state of the world. For example, if you have a longstanding client or customer in collections that has never been in collections before, why is this the case? This might very well be a one-time, short-term situation. If, generally speaking, this particular account is worth a lot to your business, you may want to consider special repayment terms to accommodate that person or business. Keeping them as a customer is likely more important than collecting their unpaid debt as quickly as possible.
Proactive and prepared
This facet of your debt recovery strategy is incredibly important. First, you must be proactive regarding your delinquent accounts. Don’t wait for late fees and interest to pile up, and don’t wait until the account is so old the debtor can’t even remember where the debt comes from.
And secondly, be prepared to answer questions, understand the debtor’s situation, and simultaneously track down and notate information supplied during any interaction with a debtor.
If you can be both proactive and prepared, it is far more likely that you can collect the unpaid debt and make the situation less stressful for both parties.
When it comes to handling debt recovery negotiations, make sure you’re only dealing with people who can actually move forward with agreements made during an interaction. This has a lot to do with what we mentioned previously — the amount recovered should justify the cost. If you’re spending your time dealing with non-decision makers, you’re wasting time, money, and resources.
Debt management = customer service
There’s no rule that states that debt recovery should be an awkward and uncomfortable process for anyone. People within all industries and of all backgrounds end up in a debtor situation at some point, and it shouldn’t be considered taboo or even a nuisance.
Those that are treated fairly and kindly during the process are more likely to be a repeat client or customer later down the road. Therefore, consider every interaction with a debtor as an opportunity to improve relations, increase trust, and open up lines of communication.
3rd party > no recoveries
If you’re debating whether or not to partner with a 3rd party debt collection agency, then that usually means you should partner with one. Many collection companies don’t require upfront fees, and they don’t collect if you don’t collect. In other words, what does it hurt?
Here’s when a debt collection company comes in handy:
- If you have a substantial amount of accounts in collections
- If you have two or three rather large unpaid accounts
- If you have no debt collection strategy
- If you don’t have someone dedicated to unpaid accounts
- If your debt collection tactics aren’t producing results
- If your debt collection costs are too difficult to manage
Here’s what to consider when selecting a debt collection company:
- Do they provide debt collection education?
- Do they take a customer-focused approach?
- Do they offer multiple payment platforms?
- Do they use modern technology?
- Do they use formal demand letters?
- Do they use automated solutions?
Interested in learning more about debt recovery strategies?
At HP Sears, we have over 8 decades of debt recovery experience, with experience collecting debt in a variety of industries and within a variety of situations. If you’d like to learn more about how to collect debt for your company, give us a call or send us a message online. We’d love to chat.