Sending accounts to collections? Do these first

While many organizations hesitate to implement collection activity, there are an equal amount that may jump into it before they have done their due diligence.

Following solid and systematic accounts receivables processes can help lay the groundwork for successful debt collections when necessary. And it may just help you keep a hard earned customer.

If you want to manage your late invoices and your reputation at the same time, make sure you’re doing the following before proceeding with third party debt collection activity.

Did you follow proper billing procedures first?

If you have customers who have not paid your business on time, you must first analyze whether your internal billing procedures were followed in the first place. Did your organization invoice on time and did you invoice for the proper amount and services? And did you send your invoice using the proper contact information such as address, email address etc…? If your customer did not receive the initial invoice, that is one legitimate reason for not getting paid.

Attempt to resolve the debt internally

Before sending late accounts to your debt collection agency, you should have internal procedures to follow up on those customers that have not paid on time. You should be communicating with your customer as soon as the invoice becomes late. Your internal communications should involve sending a statement at the 30 days past due date, phone calls to the customer to try and resolve payment and another written communication at 60 days late. You can also use any phone call to your customer to make sure they received the service they expected from you.

Document all your communications

If you’re sending additional invoices or statements, that should most likely be documented within your invoicing software. However, you’ll want to maintain detailed records of all other communication with your customers. You’ll want to note the dates, times and the general content of the conversations. Details you may want to keep a record of are reasons for not paying, disputes, hardships, promises to pay that fell through and other important information.

Complying with the law when collecting debt

While most debt collection laws are written for collection agencies, being cautious about how you communicate with your late paying customers is well worth the effort. You should familiarize yourself with general debt collection laws and regulations at the federal, state and even local levels if applicable. If you’re contacting consumers for unpaid bills, make sure you and your team understand the Fair Debt Collection Practices Act. Following these guidelines will go a long way in protecting you and your business.

Resolve disputes amicably

Let’s face it, there is an endless list of reasons why a consumer has not paid the money owed to your business. And one of those reasons could be because they may have a dispute regarding your invoice. That can include the amount, the services received from your business, or a disagreement with the quality of work. Whether the customer is correct or not, is not the point. It is to listen to your customer and hear their concerns. Just listening to your customer can help resolve the debt and mitigate any misunderstandings about the business relationship.

Inform your customer about future debt collection action

Your customers should not be surprised when they receive a communication from a debt collection agency. After attempting to collect the debt using your internal resources, you’ll need to make a decision to send that account to your collection agency. Before you do that, you should inform your customer that future collection activity will be your next step to resolve the debt. That should be done in a carefully worded letter to your customer. The letter should not be threatening in any manner, however it should be firm. If you need sample letters, most collection agencies including this one can supply you with a template.

You should already have a relationship with a debt collection agency in place

If you regularly have customers who pay late or become delinquent on accounts, then you should already have a relationship with a reputable debt collection agency. This needs to be a part of your overall accounts receivables process. Having a collection agency that you use regularly will help you create a seamless approach to your debt collection strategy. Find an agency with a low-cost collection solution, an easy-to-use online portal for submitting accounts and monitoring activity and the staff support you require to improve your debt collection strategy.

There is a fine balance between early intervention when trying to collect and not appearing too aggressive when trying to resolve a financial dispute. Following these internal steps can set your organization on a path of respectfully collecting the money you are owed.