If you have good collection policies, they include timeframes in which to take certain actions, such as the following:
* Following up with demand letters requiring payment when an account balance becomes delinquent.
* Following up with collection phone calls when demand letters don’t produce payment.
* Immediately following up with the debtor when the debtor doesn’t keep promises to make payment.
When you’ve taken the actions defined by your collection policy and your debtor still hasn’t paid, you shift into collections mode. Delay in initiating collection action, including bringing in collections professionals as appropriate, can be the death knell for collecting on the account. If your debtor still has (or may have) some ability to pay but continues to stall payment, you need to move quickly.
After you decide to start the collections process, do you collect the delinquent account yourself, or do you bring in a professional? You should consider placing an account with a professional when
* Lines of communication between you and the debtor have completely broken down.
* You can’t reach your debtor by phone, and you think your debtor may have skipped town.
* You sense that your debtor has financial difficulties and has several other unpaid creditors who will be going after what’s left of your debtor’s money.
* You don’t trust the debtor’s words or intentions because of the passage of time since the last payment and the number of promises the debtor has broken.
* Your debtor’s delinquency threatens your own credit by putting you in danger of violating standards set by your auditors, banks, factors, or receivable insurance contracts.
* Your instinct tells you it’s time to bring in a professional.
Strive for a team like relationship with your collection agency or attorney in which the agency or lawyer is an extension of your credit department. Without a good relationship, you may feel awkward referring a case to an outside collector, but relying on team members for assistance seems only natural.
Credit and Collections Kit is here to help you with this