One error in debt collection processes could cost your company, big time.
Here’s a simple fact: For businesses that don’t specialize in debt recovery, it’s easy to make a mistake when engaging in debt collection. In fact, the debt recovery industry is so mired in regulation, that the probability of making a mistake is quite high. There’s more bad news, too; companies can be fined big bucks by consumer watchdogs if the federal government discovers you’ve approached debt collection in the wrong way.
We’ve compiled five of the most common debt collection mistakes. Don’t let your company fall victim to these costly errors!
- The “Goldilocks and the Three Bears” Mistake
Companies that are too patient with customers will quickly find themselves snared by a cash flow problem. Being too patient may mean you’re not paid at all. However, jumping the gun by attempting debt recovery too soon, may damage your reputation in the market. Believe it or not, there is a science to choosing just the right approach. Understanding debt collection means knowing which processes are “just right” – and when to use them to your full advantage.
- Harassing the Customer
There are very strict guidelines related to how, when, and how often a company can attempt debt collection from a client. Make a mistake and you could be slapped with a lawsuit or government penalty. If you are “overly aggressive” in pursuit of your A/R, it could be construed as “harassment” – something no company wants to be accused of doing.
- No Credit Policy
For start-ups and small companies, establishing rules around credit is something that should happen before the first sale is made, especially in big-ticket or service-focused fields. Without a credit policy, it may be tempting to extend credit the first time a big deal is on the table. But a credit policy, identifying checks and balances for low, middle, and high-risk customers, is an important first step toward reducing the possibility you’ll have debt collection in your future.
- Failing to Follow Through
Small companies often end up pursuing debt recovery when they have time. That’s just the nature of never having enough time to do everything in a small business. But we’ve found that debt collection is one of those onerous chores that business owners will often put off for as long as possible. Calling a client that you once had a trusted relationship with to tell them they have a past due balance can be uncomfortable – so that task is one that tends to get put off. Following through promptly and consistently on any past due balances is crucial to increasing your chances of debt recovery. Don’t drop the ball – unless you can actually afford the loss.
Debt recovery is not a game – there is too much risk; can you afford not to call a professional debt recovery agency?
- Call Me, Maybe?
Companies that only use one or two methods of reaching a past due client are going to lose. That’s because just calling or just sending a letter won’t be consistently creative enough to get the job done. A well-crafted debt recovery process does a nice job of following the compliance guidelines for customer contact, while still reaching consumers in a variety of ways that will get their attention.
Companies that fail to hire a professional debt collection agency like Rocket Receivables often make these and other mistakes that fail to yield a return on their time invested. Rockets Receivables offers an affordable, yet effective debt collection methodology that will give you the results you’re seeking.