Basic Facts About Debt Collection Important To Your Business
March 27, 2010 by David P. Montana
Filed under Debt Management
Whether you do your own debt collection or hire it out to a third party collection agency or collections consultant, at some point collections issues will affect your business. If you know the steps in debt collection you can handle it quickly and efficiently regardless of whether you do it yourself or farm it out.
The first step in debt collection is deciding whether you have the resources to handle it or if you’re better off getting a collection agency. If you choose the latter, there are different pay structures. You can sell your debt to an agency, which means that they give you a certain amount of money per each dollar owed in return for the right to collect on the rest of it. Alternately, you can agree that they will get a percentage of what money they recover. Since there’s no upfront cost to you, there’s no downside to hiring a collection agency so any business owner should consider it.
The first step an agency will take is to send a letter on your behalf informing the debtor of the money owed and giving them 30 days to dispute the facts regarding the case. Most debtors do not respond to these letters, at which point the collection agency starts calling them.
The next thing you need to do in debt collection is reporting unpaid bills to the credit bureaus. This often causes consumers to pay on past due accounts because they want to keep a decent credit score.
After reporting to the credit bureaus, a professional collection agency will use private investigation techniques to make sure they have all possible phone numbers and addresses for the debtor. If you have to do this yourself, there are sites online where you can locate them if you have a previous address.
Finding the debtor when he or she is trying to hide can be very intimidating and often is enough to get him or her to pay up on what they owe you. Most debtors try to avoid calls from debt collectors, and when they realize this strategy won’t work they start to become amenable to resolving the problem.
The final stage in debt collection is when you or your collection agency work out an agreement with the debtor. Professional collections people start out by asking for full remittance but since most people who have delinquent accounts are experiencing financial difficulties, it may be preferable to get them to pay a percentage of the debt owed immediately, or work out a repayment plan.
There’s a lot to be said for getting a partial settlement right away, because the more time goes on the less likely it is that you will recover the debt. However, if you work out a payment plan you’ll also make more money on interest over time, so this is a perfectly legitimate resolution to debt collection problems as well. Either way, using debt collection techniques that debt collectors use will help you get more of your money back.
David P. Montana has thirty years experience as an industry professional, corporate consultant and published author in collection agencies services. David offers more beneficial tools and resources about nationwide debt recovery services.