Did you know that the average amount of debt for Gen X is $140,643 and for millennials is $87,448 in 2020?
With debt owing, increased expenses, and a fluctuating job market, repaying debt can be difficult for some people. Unfortunately, you need to get paid to be able to run your business. This is where a collection agency can come in and help you collect those debts.
But, remember, a debt collection agency is generally a last resort. Before you go any further with a collections agency, there are some steps you should consider taking. Keep on reading to find out what steps you need to take before sending your bad debt accounts to a collections agency.
Verify Your Bad Debt Records
Collecting can be one of the most tedious parts of running your own business. Your first instinct is to hire someone else to do the work for you. But, you should consider waiting for 90 days after your invoice date to send someone’s account to a collections agency.
During those 90 days, you can do several things on your own or you can use your in-house debt collection department. Verifying your bad debt record is the first step you need to do before sending the account to a collections agency.
Before you take any steps, double-check your bad debt records. You don’t want to go into the difficult process of debt collection and realize that the payment has been made late. Consider establishing regular check-ins to make sure that your bad debt records are up to date.
Resend Outstanding Invoices
Remember to follow up on your invoices. We’re all busy with our lives, and your invoice might have just slipped through the cracks. Give your debtor the benefit of doubt by resending the outstanding invoice.
You can also add the late payment penalties to the outstanding invoice. Make sure to clarify how these penalties are calculated and how they can increase over time. Sometimes just that reminder can make all the difference.
Discuss Options With the Debtor
Contact your debtor and try and discuss options. Be professional at all times when you contact the debtor. You want these discussions to be friendly and you want the debtor to be cooperative instead of stressed out and aggressive.
Keep in mind that you want to help the debtor make the payment. For example, the internet is essential to remote working in a job. If you have telecom debt collection, then cutting off service can lead to non-payment of debt in the short term.
You’re better off working with the debtor on options. You can discuss options with the debtor. These can include a weekly or monthly payment plan, a discount if they pay within a certain period.
Remember that by working with the debtor, you’re saving yourself from added stress and additional payments for lawyers and collection agencies. If you enter into a payment plan and they stop making payments, you still have the option to go to a collections agency then.
Document All Discussions
Remember to document all discussions with the debtor. Keep a record of the time, date, and summary of the discussions. You can go a step further and email a summary of the discussion to the debtor.
These can be especially useful if the debtor claims that you’ve been harassing them. This is one of the most common complaints from a debtor. The Fair Debt Collection Practices Act (FDCPA) has rules requiring that you can’t harass, oppress or abuse anyone during the collections process.
Harassment can include a wide range of actions including:
- Harassing or repetitious phone calls
- Obscene or profane language
- Threats of violence
- Publicly sharing a list of people who don’t pay their debts
- Calling debtors without telling them who you are
Debtors can sue you for violations under the FDCPA. You can protect yourself by documenting all discussions with the debtor in detail.
Make a Formal Demand Through a Lawyer
You can also send a demand letter to the debtor through a lawyer. This letter should detail all the consequences of not paying the debt off. Sometimes this can be enough to make the debtor take notice and pay your debt off.
If the debtor contacts you, consider offering a settlement. By offering a discount, you’ll be saving a lot of time and money in the future because of lawyer fees, debt collection fees, and employee salary.
Think of a settlement as working with the debtor to get paid. Otherwise, you can end up paying more in fees and labor.
Consider Implementing Deposit Procedures
While this may seem like advice that is too little too late, you may have some clients who are constantly late on their payments. Rather than going through the whole process again, consider setting up deposit procedures.
For example, to avoid utilities debt collection, you can ask for a deposit equal to a couple of months of service. You can consider implementing this procedure for those clients that pay late regularly.
Choosing A Collections Agency
You should keep your industry in mind when choosing your expert. For example, if it’s a municipal debt, you should consider municipal collection services that have the expertise needed for your industry.
Medical and dental debt is another area that requires a certain set of expertise. Research shows that collection agencies held $140 billion in unpaid medical bills in 2020. With the large amounts of debt at issue, you want a reliable expert by your side.
When you go to a collections agency you may also want to consider going to an expert medical collection agency or a dental collection agency like First Federal Credit Control (FFCC) to assist you with these collections.
Contact Your Collections Agency Today
Now you know what to do before hiring a collections agency, you need to start thinking about the next steps. The right collections agency can make a huge difference in the amount you can recover.
Contact your experts at First Federal Credit Control (FFCC), who have over 50 years of experience to help you collect your debts efficiently and conveniently.