In an ideal world, customers would always pay their debts. Unfortunately, this is not always the case. Outstanding customer debt is a huge problem for many small businesses that depend on the revenue from every customer to stay afloat. There are many useful strategies for collecting outstanding debt. Above all, companies need to stay within the boundaries of the law when they want to recover a debt. Pacific Collection Group outlines this difficult process and provides a road map for businesses that need to recover their money.
Understanding Debt Collection
All companies will eventually encounter a customer who cannot or will not pay for their services. It is most likely to happen when a service is billed after the fact, as in medical debt or debt for services rendered.
There are three different types of customers that do not pay their debts on time. The first is the customer who refuses to pay and has no outstanding reason for doing so. The second is the customer who has a variety of obligations and pays them off at sporadic times. The third, and the most important to manage skillfully is the customer who pays on time but is experiencing cash flow or other financial issues.
Have a Calm Attitude
When you are making a call to recover a debt from one of your customers, it is natural that you would feel upset, and in some cases betrayed, if you have a long-standing relationship with the customer. The most important thing in this situation is to approach your initial call calmly. If you approach angrily, the customer will be less likely to pay you and may feel justified in avoiding your calls. Simply being courteous and allowing the customer to pay the bill with no hurt feelings is the best way to start.
Understand Your Rights
Most business owners do not have training in debt collection or accounts receivable. You need to check state and federal requirements for collecting a debt and adhere to the law in all ways. Preserving your right to get your money back requires patience and time.
The Fair Debt Collection Practices Act (FDCPA) was signed into law in 1977. It governs the actions that debt collectors or companies that want to recover their debts may take to recoup their investment.
Under the FDCPA, you will be responsible for adhering to its provisions if you are acting like a debt-collection company. Generally, the FDCPA does not concern businesses taking care of their debts, but your actions can lead you to being noticed by the government. If you use a second company name to collect your debts, this is a red flag. Another is outsourcing the process of calling or emailing debtors to remind them of their obligations.
Many states have provisions in the law that go far above the basic principles of the FDCPA. These states include New York, Massachusetts, Maryland, Louisiana, Iowa, Connecticut, and Florida. You must check for local laws before attempting any debt collection in these states.
Some of the actions that are not permitted under the law include calling at unreasonable hours, adding fees and interest that were not part of the agreement, confiscating property, telling the debtor’s personal contacts about the debt, pretending you are a lawyer or that you represent the government, or lying about whether you will be reporting the debt to credit bureaus. Be sure that you are aware of all of the laws and how they apply to your situation.
Use a Professional Debt Collector
Many small businesses are rightly intimidated by this process, and they may feel that if they put a foot out of line, they will be subject to government penalties and lawsuits. In this case, it is smart to use the professional services of a debt collection agency. When these agencies operate above board, they can be beneficial for businesses of all sizes. Companies like Pacific Collection Group are ready to serve any business that is having trouble getting its money back.
When you outsource debt collection to a reputable company, you will be able to relax and concentrate on the future of your business.
Debt Collection and Your Business
Having a professional relationship with a debt collection company is a smart move for all businesses. When you have trouble collecting a large or small debt from a customer, using a collection agency is the best way to go. These agencies are well aware of the law and can operate legally. Using reputable companies can help take the worry out of debt collection.