Exactly how many “bad debt accounts” do you hold ? So how many of these do you predict to ever finally get hold of? Frankly, the reason most “bad debts” are never ever collected is due to the fact that the holder of the bad debt gradually forgets about all of them because of the collection effort, otherwise simply writes them off as another income tax loss.
And so, if you ‘d like to collect a lot of those bad debts you’ve got stashed away in a special dossier at the rear of your file cabinet, the first thing you should do is put together a regular routine for coping with these individuals and follow up on a collection system. You should without doubt, investigate each new customer’s credit rating before you advance him any credit. Explain to him of your credit conditions verbally, and print them on your request for payments, as well as mention the customers are chargeable for realistic collection fees. If you make it a practice to bill your client quickly, you’ll find that your customers are more prone to pay immediately.
Alternatively, if you manage your business in a slipshod manner, you’ll find your clients haphazard in their contracts with you.
May a customer fall behind in his payments, you should get under way with a light past-due notice to help remind him, perhaps suggesting that he may have forgotten the due date of his payment amount. With this notice, you should most certainly include a duplicate bill stamped, past due.
And then about two weeks later, send a second letter, this one more fervently worded than the first, nevertheless nevertheless in a sensible and well-behaved tone.
The important component here is to leave him a gap to present an acceptable complaint if he has one, but nevertheless necessitating some sort of communication from him about this subject.
Should you still not receive repayment or any word from your debtor, forward still another notice – your third – in which you bring to bear a bit more pressure and tempt his sense of fair play.
Speak of his credit rating and let him know that if he doesn’t pay, you’ll be compelled to turn his account over to a collector – even so, never make threats you don’t plan to implement.
Last but not least, two weeks after you’ve produced your third notice and you still haven’t heard from him, certainly turn his account over to a collector.
Nobody likes to be on a collection agency’s list, and once your client find out that you will indeed, turn their accounts over to an outside agency for collection, they’ll immediately accept the fact that you’re running a “tight ship”, and not try to use you for a mug.
Cohere in your collection processeses, and don’t allow special favors. Establish a regular method for collecting from overdue accounts, and stick with that process. Something else truly worth mentioning is the naked truth that unless you have supporting evidence to show that you have undertaken to collect your write-offs, the IRS will disallow you to write them off as a business loss.
A few of the things to keep in mind … Your collection correspondences should contain the date, name/address of the debtor, a description of the merchandise involved or the services provided, and the amount due. It’s also a sensible idea to include a self-addressed reply envelope in order to make things easy for him to mail his check. Something else to consider is the use of imprinted envelopes with the phrase – Address Correction Requested – so the postmaster will provide you with a forwarding address in case he has moved.
In nearly all cases, you should address your notice to a specific person, not to either the purchasing section or the company generally. In other words, it should be your undertaking to try to continue your association with the person who signed consent for the purchase firstly. Your notices should be firm but reasonable, and should leave the debtor an option to organize a schedule of payments or an honorable way out of his financial predicaments.
Telephone calls work very well in that they usually catch the “slack payer” off guard, and can result in his promising to pay by or on a certain date. The thing is though, before you begin calling on bad debts, ensure that you’re thoroughly familiar with his account, and that you have his file in front of you when you make your call.
You or one of your agents may make a personal visit to see him and go over the reasons he hasn’t already paid, but if he doesn’t choose to talk to you and orders you off his estate, you must not argue or attempt to reason with him. The only thing you should do in such a situation is to leave without further words.
When you do visit the debtor and he furnishes a partial payment, by all means take it. Start by demanding the whole amount, but prepare to accept whatever he offers, and work out some kind of payment schedule from there. If you can’t collect the cash, try bartering – in other words, trade the price of your statement of indebtedness for something he has that you can either use, sell or trade. Only as a last resort should you attempt to reclaim the product you sold him.
One other point, if he or she claims to have mailed you a check more than just a few days ago – long enough for the check to have reached you – demand that he stop payment on it and issue a new check. Above all else, keep cool and don’t agitate or become threatening towards him.
To achieve results, collection letters should be distinctive. Some companies use a special letterhead printed in red ink which attracts the eye better than another color and gets biggest attention. At the same time, a great many of the collection agencies say that smaller than standard sized paper, plus the use of paper that feels and looks expensive, always gets getter final results.
Never use tomfoolery in a collection letter. If you do, your recipient won’t take your collection efforts seriously. Keep a sense of urgency, but don’t imply that you’re irate – serious, yes – but mad, no. The psychology behind the tone of your collection notices is simply that the recipients tend to duplicate it.
You should deliver your letters over arranged intervals – about once every 10 days or two weeks. This will work in your favor because when several creditors are on a debtor’s heels, he generally responds the fastest to whoever is one of the most insistent.
Make sure you don’t ever defame a debtor in writing. To do so will give him a chance to “hang you” for defamation. To always make sure you’re within your legal rights when trying to collect a bad debt, keep these rules in mind!
Address yourself only to the person responsible for the costs that’s owed.
Send your collection documents in sealed envelopes to ensure that other people don’t see them.
When phoning him or her, don’t talk about the nature of the call with anyone else. Don’t tear into him or her personally, even is what you say about them is true.
It’s okay to reveal the next step in your collection efforts – you’re going to turn his account over to a debt collection agency, or to take him to court – but don’t describe what will happen to him if he doesn’t pay.
And inevitably, always make it as easy as possible for a bad debtor to pay up.
Thousands, even millions of “bad debts” can be collected – but, it takes a planned collection process and the tenacity to last them out – the best of good fortune to you!
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