Pay close attention to your internal business debt recovery efforts. Use daily metrics to track the effectiveness of your strategies to collect on funds that are owed to your firm. A healthy cash flow cannot be maintained when the funds outstanding become larger and spread out across a number of customers.

Schedule regular meetings with your accounts receivable manager to discuss the outstanding business debt that must be recovered. Make a list of the debtors who are chronically late or slow payers. Follow the three steps below to learn more about debt recovery basics.

1. Hire a business debt recovery company.

2. Review debt recovery materials.

3. Talk to debt recovery experts.

Action Steps
The best contacts and resources to help you get it done

Contact business debt recovery firms

Make a list of the different types of business dept that are owed to you. This may include outstanding accounts receivable or equipment loans. Include the number of days old the accounts are, the value and the primary contact person. Contact debt recovery companies to determine the rates charged and their ability to assist you with business debt help.

I recommend: Calculate how much your current accounts receivable is costing and the return on investment. Take the oldest debts and calculate the costs for a full service debt recovery service provided by a debt recovery company. Contact USA Credit Recovery for a quotation. Sign up with Collect Quote to get a list of quotes from the recovery services.

Read about debt recovery

Explore the different types of newsletters and publications on business debt recovery. Talk with your bankers, accounting services firm and business associates about the debt recovery services and strategies they are using to manage their business debt recovery. Stay up to date with trends in your industry to ensure you collect on your debts from companies in trouble.

I recommend: Subscribe to a newsletter on business debt, the services available and the type of advice offered to businesses struggling with their business debt. Debt Associates offers a free newsletter on debt management issues. Contact Johnson, Bunce & Noble, PC to sign up for their newsletter on creditors rights and debt collection.

Work with debt recovery services

Meet with small business debt consultants and specialists who can advise you on the next steps to follow to manage your commercial collections. There are a series of escalating tools available to businesses as they work on commercial debt management. Discuss your business debt recovery plan with your accounting services firm to get guidelines on cut off dates and other accounting processes.

I recommend: Discuss the scenarios with a law firm to get details on the legal options available. Lloyd, Benton & Taylor specialize in creditor issues and would be able to assist. Debt Consulting Corporation provides expertise in the management of outstanding business debt.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Funds owed to a business must be repaid to ensure the financial health of your firm. Debt recovery can be unpleasant, but it is a function that must be performed effectively to ensure a healthy cash flow.

Nobody wants to send or receive a collection letter, but a well-crafted note can get you the money you're owed without causing undue friction with your clients and customers. Besides avoiding the cost of working with a collection agency (and the hassle and embarrassment for your customers), a good dunning letter gives clients who may have made an honest mistake a chance to put the check in the mail, but also deftly puts the heat on the deadbeats.

A successful collection letter will be:

1. Straight and to the point. Use simple language and a firm, but unthreatening, tone in a customized letter that includes invoice date, total amount due and request for full payment with a due date.
2. Short. The letter should be no longer than a page with short paragraphs.
3. Communicate the consequences of not paying immediately. Don't be rude, but make sure the customer knows what action will be taken and when if he doesn't pay up.

Action Steps
The best contacts and resources to help you get it done

Copy then customize

Write a customized letter, but it doesn't need to be written from scratch. Check out free samples of effective dunning letters.

I recommend: CCH offers three professionally written letters that can be customized to meet your needs. CreditGuru.com also has free collection letters and a final notice.

Generate it from software

Software can generate dunning letters and can sometimes be linked to accounting applications you already use.

I recommend: Oracle users can download Oracle XML Publisher for free, which generates collection letters as well as financial statements and reports. Business Letters.com offers software that generates collection and other types of business letters.

Turn up the heat

Start with a friendly letter, then make the following ones sound increasingly pointed.

I recommend: Read up on Collection Letter Secrets to Getting Paid.

Educate your staff

Spread the knowledge on how to write effective collection letters and talk on the phone with delinquent customers.

I recommend: Right A.R.M. Consulting provides debt collection training as well as a training DVD.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Flood the zone. Besides a letter, send emails and faxes. Some customers may respond better to a different media.
• •  Appoint a collector. Training one person to handle the deadbeats frees up the rest of the sales staff and helps ensure the collection process will be effective and professional.
• •  It's not you. Every business deals with late-paying customers; don't take it personally and keep it civil.
• •  Pull the plug. If a series of letters, emails, faxes and calls doesn't do the trick, you've done everything you can. Call a collection agency.

Invest the time to expand your knowledge and understanding of business debt recovery. There are federal and state laws surrounding acceptable business practice for the recovery of business debts, as well as the filing of bankruptcy and corporate debt restructuring. Learn the key concepts to ensure you make the best possible use of debt recovery services.

Talk with your accounting services firm, banking professional and industry contacts to understand what is standard business practice in your area and industry. Use this information as a guideline when defining your debt recovery guidelines. Follow the three steps below to learn more about using debt recovery.

1. Research debt recovery legislation.

2. Meet with debt recovery consultants.

3. Review debt recovery with lawyers.

Action Steps
The best contacts and resources to help you get it done

Read debt recovery legislation

Expand your use of debt recovery management by exploring the options available. Read the federal and state legislation on debt recovery. Stay current on the legislation surrounding the different financial options for companies to minimize your risk.

I recommend: Find information on business debt help and corporate debt restructuring. Fair Debt Collections provides links to the actual legislation on debt collection. The Federal Trade Commission website provides detailed information on debt recovery. Educate all your accounts receivable and finance staff on the legal limits and rules surrounding collection activities.

Work with debt recovery consultants

Improve the efficiency of your debt recovery services by incorporating the best practices from debt recovery companies. Talk with your colleagues and debt recovery company staff to get timely advice on how to proceed and when to move to legal recourse to obtain business debt recovery.

I recommend: Work with accounting services and business debt restructuring consultants to learn how and when to utilize a debt recovery service. Contact Dunn Consulting Group or Debt Collection Steps to learn more. Make notes and discuss the options with your financial staff and determine what process makes the most financial sense for your firm.

Discuss debt recovery with lawyers

Educate yourself on the process for collecting on small business debt using legal channels. As a creditor, there are certain procedures that you must follow to have your debt counted during a business debt restructuring. Collecting on international business debt is another process where legal advise is helpful.

I recommend: Schedule time to locate a bankruptcy lawyer in your state, such as Seth Legal. They can advise you on how to proceed on debt recovery when a firm enters into bankruptcy. Take a close look at the structure and amount of credit you have extended to other firms and manage it within these guidelines. Increase the intensity of your collection efforts to ensure your firms risk is minimized. Talk with Harris Moure about debt recovery from international firms.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Learn about the types of debt recovery services available and stay current on the legal limits around these activities. As the customer, it is up to you to state what is acceptable business practice.

Having bad or old debt on the books of your business hurts the bottom line. Debt recovery programs provide an answer to collecting those debts. These programs use a combination of collection letters and phone calls to encourage debtors to pay up.

Whether you plan to start an in house debt recovery program or outsource your bad debts, knowing the key terms you will run across during the recovery process is vital to the program being as effective as possible.

Action Steps
The best contacts and resources to help you get it done

Accounts receivable

In a general sense, accounts receivable refers to the amount of money owed by each customer. In most cases, unpaid amounts that have been invoiced are eligible for debt recovery as long as the due date of the invoice has passed.

I recommend: Business Owner's Tool Kit offers an in-depth look into accounts receivable.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act provides protection to consumers against harassing debt collections. When initiating a debt recovery program, it is vital for you to ensure that these guidelines are followed.

I recommend: The Federal Trade Commission offers information on the ins and outs of the Fair Debt Collection Practices Act.

Bankruptcy

Bankruptcy is a judgment by a court that relieves the petitioner of some of his debts. In some cases, it removes the debt completely and in others, the petitioner is required to pay the court each month for the court to apply toward the debts. If someone with a bad debt files for bankruptcy, the amount they owe your company may be included in that judgment. If that is the case, you must stop all collection activities, which includes any debt recovery programs.

I recommend: The US Navy Judge Advocate General website offers information about bankruptcy, including how a bankruptcy judgment affects a consumer and a creditor.

Collection agency

A collection agency is any third party company that is hired by a creditor to try to collect payment on past due accounts. Collection agencies are subject to a statute of limitations, as well as the Fair Debt Collection Practices Act.

I recommend: Card Report offers detailed information about collection agencies, including the methods used and limitations placed on them.

Statute of limitations

If you have bad debts owed to you, there is only a certain amount of time that you can sue for those debts. This is called the statute of limitations. The time can range from 5 to 10 years, depending on the type of debt.

I recommend: You can find information at Fair Debt Collection.com about the statute of limitation laws in each state.

Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC) is a set of guidelines that have been enacted into state law in every state except Louisiana. These codes govern every aspect of customer relations--from the actual sale to providing letters of credit or sending out dunning letters.

I recommend: WiseGeek offers a detailed look into the Uniform Commercial Code and how it affects consumers, businesses and debt recovery practices.