VITAL: Why debt recovery policies are essential
In the modern world competition is fierce and letting bad debts accrue can be harmful and in some cases fatal to your business.
This is where it becomes vital that any company offering high value assets on leases to individuals or companies should have a system in place to detect potential bad debtors and then act promptly to stop them becoming a write off.
When a leaseholder has defaulted on a maximum of three consecutive monthly payments, the time has come to outsource your collection and begin the process to recover both your asset and the money owed to you.
As efficient and effective as your in house team are it is unrealistic to expect that they will collect from every leaseholder.
A sad reality is that, despite your own personal efforts to recover the debt, many debtors will only respond to contact from a third party.
People have a perception that collection agencies are people who employ old fashioned, heavy handed, intimidation tactics to extract money from debtors but this is no longer the case.
A good agency can work in a positive way for your company because often the reason payment has not been forthcoming is that the debtor has genuine difficulties but is too embarrassed to contact and negotiate with you.
This is where a professional company can work on your behalf and get the matter settled.
While it may be the case that you currently have a debt collection policy in place it is always prudent to have at least one or more companies chasing your debts because, no matter how good your current agency is, none will collect at 100% success.
If one cannot collect your money then it is good business practice to send it to another agency that will use different methods or techniques to recover money outstanding.
By having multiple agencies working for you it should increase the success rate which ultimately will boost your business cash flow.
Should the debt recovery process not be successful in recovering your money then legal action is a powerful weapon and one that regularly prompts the debtor to realise the seriousness of the matter and arrange payment to you.
In today’s society, credit is the third most used form of payment and the threat of a judgement which will limit someone’s ability to obtain credit or buy something on hire purchase is often an effective deterrent to any potential debtor.
Taking legal action can appear a complicated process but a good collection agency can provide you with these services and the advice you need to make it a very easy process and take the pressure off your team.
Having a clear and effective debt recovery policy will ensure that your business becomes more profitable and successful in the long term.
The longer an outstanding debt is left without escalating to a third party or legal action being taken the greater risk of it not being paid.
Also, the longer you leave it to refer a debt in the hope that it will be solved the less chance there is of the debtor still being at the address you have and more chance they have filed for bankruptcy which will negate any chance you have of recovering your money.
Ultimately, letting unpaid debts become write offs can be the difference between a profit and a loss, or in extreme cases, the difference between survival and liquidation.