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How to Be an Effective Debt Collector

Bybusiness.com editorial staff,
business.com writer
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Feb 19, 2019
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Educate yourself on the situation, document your actions and avoid assumptions.

If you ask entrepreneurs what one of the worst aspects is about running their business, most will answer, "Collecting overdue invoices."

Managing accounts receivable is an essential part of running a business, second only to getting and keeping clients. Receivables are how you pay employees, produce products and run your business.

When a client doesn't pay, you have to address it. But it's also difficult and can be even more sensitive depending on how customers react. 

Editor's note: Looking for a collections agency for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

 

Ways to Improve your debt collection process

There are a few ways to become more effective at debt collection. Follow these tips to make collecting overdue invoices a little easier.

Be prepared

If you think calling a client to request payment is uncomfortable, imagine how much worse it could be if you are wrong. Before picking up the phone, do some digging and make sure that payment was never received, or that the client never talked to someone in your organization to renegotiate payment terms.

It's also worthwhile to understand your client's business and learn about whom you'll be speaking to. Don't start a collections conversation with the wrong person at the company. Politely ask and ensure you're speaking to someone who can talk knowledgeably about the company's bills and make decisions on payments.

Educate yourself

You'll feel like you're on steady ground if you make a collections call with an understanding of what your rights are. Learn your rights and what the regulations are for B2B collections in your area.

Knowing what you can say and do will help you confidently negotiate with a client whose payment is past due. It also prevents you from taking an action that could jeopardize your legal position, should it come to that.

Document, document, document

When talking to a client about an unpaid invoice, take copious, detailed notes. Document who you talked to and the date and time. Take notes on what your client says. Keep copies of emails exchanged and letters sent. Compile your contact notes and keep all your documentation together. You may need it in the event of future legal action.

Don't make assumptions

Don't assume anything about why you haven't been paid. It's shocking how many companies simply forget to pay an invoice and are more than happy to take care of it once they are reminded of it with a simple and friendly letter or phone call.

Also, don't assume your client's excuses are, well, excuses. They may be valid reasons as to why the company is struggling to meet its obligations.

Stay professional

There are a lot of negative emotions tied up with collections. There is worry about making your own payments, concern with how unpaid invoices will impact your business, and anger over your work being disrespected. It's also easy to feel like you're being taken advantage of.

Put all that aside when talking with a customer about unpaid bills. As mentioned, they may have just forgotten or may have a legitimate reason for delaying payment. Expressing anger and lashing out isn't likely to get you paid any faster, and it might also lose a good client who is simply going through a rough patch or is forgetful.

Establish payment terms

Whatever the reason for the late payment, work with the client to get a commitment from them to balance their account. You may consider taking a lesser amount to get the unpaid invoice off your books. Or offer to set up a payment plan if you think the client wants to pay you but doesn't have the means at the moment.

Regardless of what you agree to for remittance, find out when and how they plan to make a payment and document the information. If you offer a payment plan, be sure you are both clear on how that will work, and, again, document the agreement.

Follow up

Until you receive payment, be prepared to follow up. Start with documenting and sharing any payment agreements you came to in your discussions, whether those were for a payment plan or a new date.

If a check doesn't arrive when expected, follow up within a few days of the missed payment. Continue to remind the client that they owe you and that you're not going away until they have lived up to their end of the agreement.

Consider Hiring a Debt Collector

If all else fails, consider hiring a professional to handle your collections. You should expect that any client you send to collections won't be continuing the relationship. Then again, do you really want to provide products and services to someone who doesn't pay?

business.com editorial staff
business.com editorial staff
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