How to Collect Past Debt - A DIY Guide

Cash flow is the life blood of a business. Companies that maintain positive cash flows have funds available to pay their employees, distribute amounts to shareholders, and pay their bills and debts in a timely manner. Improving your cash flow is an important aspect of any business. One way that a company can improve their cash flow is by collecting their outstanding debts. Collecting debt is not always an easy process and can require significant amounts of time and effort from a company. This article will provide ways that companies can work to improve their cash flow by collecting on their past debt.

Some companies will obtain help from a collection agency to handle their past debt collections. While this can be helpful, these collection agencies also collect a payment for their services that is effectively a percentage of the debt that is outstanding. This leads to lower profit margins for your business. Your business can be significantly more profitable if you are able to collect on your outstanding debt yourself. There are various ways to collect balances from customers which should be handled in an escalating way in order to avoid confrontation and to avoid offending the customer which may limit future sales. Do so with the following course of action.

Step 1 - To start with a company should perform an assessment on the outstanding past debt that they have. Begin by assessing in what way the debt arose, how long it has been outstanding, and what the payment terms are on this debt. Understanding who owes you money, what their past payment practices have been, and determine the likelihood that you will be repaid. 

Step 2 - Send a formal invoice as a reminder regarding the payment that is due. This should serve as a reminder to them to increase the likelihood that they will pay the bill. 

Step 3 - After this, you should follow up with a phone call to their accounts payable balance and request a payment. Ask for an update and see what their plan for paying a bill is. If they say that will be making a payment document this and check your bank account and search for checks. A few days afterwards follow up with the same person and ask for information as to why they did not follow up with their payment. Continue to repeat this process until you receive payment.

Step 4 - If the customer still does not pay their outstanding debt then you should start to explore other options. If the balance is from a reoccurring customer then you can threaten to halt service. In some situations, it may be expensive for a customer or business to change service and threatening to cut off the supply of the business may be enough to get paid. However, this does not always work and many not result in payment on the past debt. 

Step 5 - You can also threaten reporting this to a credit agency which may harm their ability to make future borrowings or you can threaten a lawsuit. To file a lawsuit you will likely have to retain legal counsel to follow the proper filing procedures. Using a credit agency is easier than using a lawyer. So you are better off reporting claims to the credit agencies. There are three major credit agencies; Transunion, Experian, and Equifax. You can hire a service that reports these claims on your behalf for nominal fees. It is necessary to file claims with all three of these agencies. Once your claim is reported to them, a borrower or customer may be more likely to repay the debt to you in order to have the item removed and reporting to a credit agency is therefore a useful bargaining tool.

Step 6 - File a formal claim in a lawsuit. Contact a lawyer to handle the case. 

Step 7 - Hopefully collect and deposit your money into the bank. You've earned it!

It is not hard to collect your outstanding debt and developing a process for doing so and maintaining solid records regarding sales is a good way to do so. Be sure to be in constant communication with customers regarding their outstanding balances which can aid your collections as well. There are many considerations that must be made when deciding how to pursue customers for past debt. Developing a plan that involves escalating steps allows customers to feel as if you treated them fairly and that they are responsibility for the repercussions of not paying and may keep from alienating them.

Contact Us today

Contact Us Now


 

Nationwide Collections :: P.R. Company 1045 Rt 109 - Lindenhurst, NY 11757 - 877-840-2140