Six Effective Debt Recovery Strategies You Should Know
If you are managing a business and you want to make sure that you have a bulletproof debt collection system in place, hiring a credible debt recovery team is the best thing you can do for your business. A team of professional debt collectors are experts trained and equipped with a variety of strategies and techniques they can use to recover what’s due to you without harassing your valued clients.
While every business has its own proven techniques when it comes to debt collection, the following techniques are some of the most appreciated methods used by collectors which have shown to have yielded the best results.
1. Know the Root Cause of the Problem
Part of doing business is building a rapport with your valued clients. More often than not, clients fail to comply with their contractual obligations on time due to several reasons, such as poor cash flow and/or other unforeseen cash issues. If you know the root cause of the dilemma of your debtors, and you know there are ways you can help their situation, it is better to discuss the solution head on to avoid losing income and to prevent your company from losing a client.
Most clients find it difficult to cooperate as they are feeling embarrassed and harassed into paying their dues. If your delinquent client feels that you empathize with their situation, it is highly likely that they would want to solve the problem immediately without taking any legal actions.
Acknowledging the struggles of your client and what caused them to get into such a situation can lead them to cooperate more easily. This gesture gives your client the valuable insight that you are not only concerned about getting what is due to you but also there to help climb out of their debt hole and get on track again. A lot of business owners may not be aware of this but this kind of empathy can do a lot of positive feedback to you as a business owner and to your business as well.
2. Provide Helpful Solutions
This often goes along with the first strategy–knowing and sympathizing with your valued client. If you are successful in identifying their struggles, it would be best for both parties if you can accommodate a helpful solution that fits well in their capacity and current situation.
Although the alternative payment plan may yield a slower turnover, you could still prevent losses, at the very least. The important note in this premise is no matter how long the terms indicate and no matter how small the payment could be, you will still be able to maintain the cash flow — which is still a win-win situation, after all.
3. Add Collaterals to the Equation
Aside from signing a well-executed and binding contract, it is also wise for business owners to require clients to consider adding collaterals as a security in case they fail to comply with the terms and conditions of the contract. This collateral will help you recover an item that costs a considerable amount once your client fails to observe the stipulations of your contract or worse, absconds.
As a matter of fact, the greater the value of the collateral, the more compliant the client could be as they would fear to lose the possession of such collateral. So the next time you devise a contract between you and your client, make sure to consider adding collateral to the equation to ensure that your client will transact in good faith until the end of the business agreement.
4. Arrange Flexible Terms
As a business owner, it is important to think ahead and imagine possible difficult situations your business may encounter in the future. In cases of dealing with clients, it is best to always offer and/or arrange a flexible term payment to your clients to ensure that you both get the best results in every situation possible.
Even when your clients think that they are capable of one payment arrangement, it is still better to offer a flexible alternative should they meet tougher roads in handling their business. This invites an even open and transparent environment for you and your client as they will be more vocal and honest should they experience some financial difficulties during your business transactions, helping you as well to make the necessary adjustments on your end and avoid any disruptions that may hinder your business operations and its growth.
5. Consider Getting Professional Help
There are times when companies run out of techniques to solve their own dilemmas. For cases like this, it won’t hurt the business if they consider getting assistance from an expert. In fact, this is time-efficient with a bigger chance of getting a favorable outcome because these professionals really know what they are doing.
This is equally applicable when your business is trying to recover debts from delinquent clients. Debt collection agencies have exceptional debt recovery strategies to employ which means they provide higher success rates in dealing with overdue accounts.
Hiring a debt collection agency also saves you a lot of money more than you think. Since you are only outsourcing the task of collecting what is due to you, you do not need to hire entire manpower which you are required to pay not their salary but the space they’ll be taking up in your office which amounts to additional expenditure for your company. In this premise, you just have to forward the outstanding accounts of your delinquent clients and let the expert do the rest of the work.
6. Assess All Existing Accounts
This one is related to the first techniques: assessing all of your existing accounts and ascertaining the problematic accounts from the good ones. This is an efficient way of evaluating which accounts need more attention, allowing you to allot more time and energy to fixing the root cause of the problem. By focusing on the outstanding accounts, you will be able to distribute the workload evenly to your manpower of debt collectors — getting a higher chance of yielding a positive outcome because you have evaluated and segregated which accounts need more attention.
Richard Scott is a passionate finance writer and business coach who spends his time helping small businesses to eliminate debt and implement cash flow positive collection processes.
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