Small businesses need to maximize the efficiency and effectiveness of their collection strategies. The main goal is to collect more funds and have everything updated in terms of your accounting. It’s totally different from contacting customers of their overdue payments, rather than a set of strategies that would improve the flow of your debt collection.
Restrictions on Granting of Credit
You have to minimize bad debts and consider granting credit as an investment on your accounts. It begins with deciding how much this is and how easy your business would grant it to your customers.
Collections First Approach
The largest invoices go first, direct your collection staff to them as it gets greater return for the time spent. If you need a third-party credit analysis, then go ahead so that you can determine which customers are currently in the best financial health and collect from them first.
Get Your Debtors Located
At the same approach above, determine the updated address of your debtors. If your customer owes a large sum and they no longer reside on the last-known address, then it would be a headache for your debt collection processes. If you need to, we recommend hiring a skip tracer for this.
Use the right tools for the job. Some collection tools will allow you to suggest if you can accept converting overdue receivables into loans. Returning goods or taking customers into court. The business will also be now aware of their available working capital, track if their product loses value and so on.
Communication is the Key
It may not immediately result in a payment, but communication with your customers will help increase your collection as the relationship will result in a better willingness to pay even at a later date. Sometimes customers might just be having financial difficulties but will be more willing to pay if communicated to, especially when their financial circumstances improve. Just make sure your communication is timed in a way that it doesn’t become a series and take time away from the work that you need to do.
Be Open to Handing it Off to a Collection Agency
You must determine a point which you will hand it off to a collection agency. For example at the 90 days of the collection effort and as determined by the customer contract. The main point is to stop dragging it out, so as not to make a stale receivable and make it harder to collect in the future.
Whatever strategy works for your business, it’s always good to take a look at some of the strategies that may prove useful to improve debt collection. It is always good to put them in writing and as a general guide to your staff. A shift in your strategies via a certain calendar period might improve your process, responding to different economic climates and your business stance as compared to your competitors.