3 Ways to Reduce Bad Debt and Make Sure Your Customers Pay

By: Ruben Soliman
Submitted: 2007-01-17 16:15:20
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Whether you've got a few bad debts that need to be collected or a noticing that non-payment seems to be a trend for your customers, getting a collection agency on your side will set things into motion immediately. Here you'll find some essential reactive and proactive steps you can take to ensure that your business doesn't lose money because of your customer's unwillingness to pay.

Send a 10 Day Demand Letter

Customers make decisions about which companies they need to pay right away and which ones they can put off. Don't let your company be the one they think is soft and can be strung along for payment. Inform customers that you've got a collection agency on your side by sending a 10 day demand letter. Oftentimes, receipt of a demand letter from a collection agency is enough to get customers in default to start making payments. If not, the collection agency will begin pursing the funds after the 10 day period.

Be proactive: Collect detailed information from your new customers You never know when a good customer will turn into a bad debt. The fact is that when companies experience difficult times, there is usually some money to pay bills, but perhaps not enough to pay all of them. Make sure your customers know that your company is one they should pay first by having them sign an agreement that informs then that your debt collection process include a collection agency. When opening a new customer account, ask for all of the necessary information a collection agency will need in order to pursue payment and update information regularly. You'll need to have certain key customer information in order to contract a collection agency for recovery:

·Contact Name(s)

·Business Type (LLC, Inc, Sole Proprietorship)

·Physical and billing address

·Multiple contact numbers (direct line, cell, fax, etc)

Implement a consistent billing and collection process

As a business owner, your goal is to make and retain good relationships with customers. This means treating them fairly but firmly during times when they may be experiencing financial difficulty. The key to accomplishing this is to establish a set of expectations through your billing process that begins with a monthly bill, then a late notice, followed by a 10 day demand letter, followed by collection agency contact. By doing this consistently, your established clients aren't likely to get offended or scared off, but rather understand that this is part of your process and not personal.

The older a debt gets, the less likely you are to collect the full amount. It's important to clean up old debts and start a proactive billing approach that involves a collection agency in order to avoid future bad debt. According to statistics from the Commercial Law League of America, after a debt is 3 months old, you're likely to receive only a 73% return on every dollar. As time passes the amount of payment you're likely to receive decreases drastically. Teaming up with a high quality collection agency can have an incredible impact on your ability to recover funds and greatly improve the overall profitability of your company.

Ruben Soliman is a freelance copywriter. For more information about what a collection agency can do for you, visit http://www.abusa.com.

Article source: Expert Articles

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