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Debt Collection Tips

Most businesses obsess about sales and just assume that the bills will get paid.  Unfortunately this type of thinking can turn what would otherwise have been successful businesses into businesses that go bankrupt because of a cash flow crunch.  It's vital for any business to think about how they are going to get paid and just as importantly when they are going to get paid.  Having a systematic approach is made much easier with the use of most computer based accounting software, enabling you to send certain letters to certain clients at various dates after due.  The idea is that the letters should go from friendly reminder to progressively firmer approach.  It's a good idea to follow up by phone early in the cycle that way you can overcome any objections that they may have to paying i.e didn't get the invoice etc etc. 

When you are dealing with persistent bad payers it's worth asking yourself if you should impose additional conditions to the business.  This is obviously something you need to consider on a case by case basis.  Nonetheless, even if you have a credit controller in your business there is still a cost to chasing debt and the more steps involved the higher the cost.  Sometimes, it's worth either imposing conditions on the very bad payers i.e. pre-payment or indeed higher pricing or even doing without their business. 

Using a collection agency falls nicely into this systematic approach.  You could either outsource all your debt chasing to them or alternatively pass on debts that you have already processed through your debt collection process.  Often, the use of an outside company helps prevent the adversarial situation between you and your client directly and it's worth paying a fee to extract yourself from the discussions.  Added to that, people will often take a collection agency more seriously than you.