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Bad Debt Recovery
Bad Debt Identification
Identifying bad debt is not as easy as it sounds. But the
earlier it is done, the better are chances of recovering it. Here
are some signs of customer behavior that can identify bad debt
early:
Customer fails to pay as per the agreed payment terms.
Customer makes repeated unrealistic complaints about the
product or service quality whenever asked about the payment.
Customer continuously asks for more time to pay debts.
Customer's contact person is not traceable whenever you call
for debt collection.
Your phone calls and/or letters are not answered.
Apart from these, you also have to keep an eye on customers
who constantly pay late. Ongoing communication between the sales
and finance departments can go long way in preventing bad
debts.
Keeping track of market sources such as magazines, other
customers, and suppliers will also help you identify customers
who are not in healthy financial condition and help you recover
your dues from them at the early stage.
Bad Debt Recovery
Once you identify the bad debt, the first step is to make
attempts yourself to recover it in-house. This way you can
maintain a relationship with the defaulting clients. It also
helps you create documentation and evidence to show that you have
made enough attempts to recover the dues. If the collection staff
has knowledge of the Fair Debt Collection Practices Act and
experience in debt collection, some of the debt can be recovered
easily.
But an in-house staff is not always sufficient. If the
defaulting customer doesn't pay any attention to your repeated
efforts, it is advisable to refer the case to a professional
collection agency. These collection agencies are often well
equipped to trace and deal with delinquent customers and bad debt
recovery. But you need to make sure that the collection agency
you are working with meticulously follows the Fair Debt
Collection Practices Act and doesn't step beyond legal
boundaries. Remember that the collection agency is representing
you, and you don't want it to get you in trouble with the
law.
Also make sure that you give all necessary data to your
collection agency on all cases referred to them. It is also
important to let them know how important each case is to you so
they can apply different techniques to different cases.
Collection Agency Services offers you a wealth of information
on how to select the best collection agency
for your business.
MORE RESOURCES:
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