Strong Debt Collection Processes Key to Planning for an Economic Recovery

Businesses remain vulnerable to failure and financial stress despite the improving economy, with research showing that the early years of economic recovery after a downturn present businesses with complex new challenges that strong debt collection processes could assist with.

Research into the period following the Dot Com burst of 2000 showed that business failures jumped. One of the key reasons for this appears to be that many businesses aren’t ready for a recovery following a downturn and are often under-resourced and under-stocked when orders start flowing in, placing pressure on cash flow.

The current economic upswing presents new challenges for businesses. Here are some tips on how businesses can put in place strong debt collection processes and maintain a tight hold on cash flow and risk assessment.

More frequent contact with slow paying customers

If slow paying customers start ignoring telephone calls, this could be an indication that a collection problem that needs to be addressed rapidly before it gets out of hand. If a customer is not willing to discuss the debt with you and establish an acceptable payment plan, you should be referring the situation to a Commercial Collection Agency Association (CCLA) certified debt collection agency.

Be mindful that the 1977 Federal Fair Debt Collections Practises Act (FDCPA) protects consumers from threatening, inappropriate behaviour by collectors.

Strict Processes

If a customer has defaulted twice on the promise of payment and cannot provide immediate remittance, you should be referring their account to a collection agency. Some customers may provide a partial payment after having defaulted twice. If this is the case, then a strict payment arrangement should be put in place on the balance and if the customer fails to meet their obligations under this arrangement, their account should be referred to a debt collection agency.

Be vigilant

Look for warning signs that a customer is about to become a delinquent on an account. For example, if a slow paying customer raises a dispute out-of-the-blue about the service or merchandise this could be an attempt to delay payment; a customer bounces a check and avoids calls and follow up efforts could be another indicator that a serious payment issue is occurring.

Remember, in this economic climate, time is not on your side. Acting quickly to resolve accounts is one of the key steps in avoiding financial disaster. Discussing delinquent accounts with a collection agency, determining your options and taking action, will significantly help with business cash flow pressures.

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