As a business owner you might have often found yourself in a situation where a debt has gone on for far too long and now, you’re in a situation where recovering the money seems next to impossible. This is a relatively common problem when it comes to debt collection. You will find many people who will either not pay or will have multiple hurdles to making payments.
But in these situations, the business begins to suffer more than it must, because a reliable solution is not present for collecting debts. As a debtor, being sent to collections is a whole other mess as well, which creates considerable problems for your credit score as well.
This is why it is important to devise useful and workable pre-debt collection methods that can save both parties the trouble of the back and forth.
Pre-Collection Methods You Should Be Implementing
Here are some ways that you can avoid the hassle of collection. These are some methods of pre-collection for debt collection that can work:
Reminders and notifications:
the first mode of connection anyone would resort to is communication via text. You can start by sending polite and cordial messages to remind the debtor to make their payment as soon as possible. Always try and use non-threatening language so the debtor doesn’t feel afraid or intimidated in any way.
Debtor segmentation:
when trying to extract payment out of your debtors, you can’t use the same kind of strategies on everyone. This is why it is important to sort out the kind of debtors you have in groups. These groups identify the financial situation of each debtor and their intent to develop separate strategies for each of them.
Developing Payment Plans:
Once you are aware of your debtor population and the groups they fall into, it is easier to devise specific payment plans for them. Talk to your debtors and enable flexible payment plans that suit their situation. This will allow you to collect more efficiently and avoid long-drawn exchanges. Make sure your terms are laid out clearly so that both parties know what is expected.
Maintain good customer service:
You won’t get anywhere with a debtor if your attitude is demanding and pushy. Always establish a friendly repertoire with the debtor and provide support where needed. Each person will have different concerns so try to listen to them and assess your strategy accordingly.
Keep some wiggle room:
Always be ready to negotiate more suitable ways for people to pay their debts based on their financial situations. If you have room to adjust the specific payment plans and abilities, it will help foster a healthier relationship with your debtor.
Schedule payment reminders:
Oftentimes, when you set up reminders for payment, most people will pay at their first convenience. If it isn’t an issue of forgetfulness, you can encourage client compliance by maintaining a swift stream of reminders at regular intervals.
Intervene promptly with late payments:
If there is a delayed payment, be proactive in approaching the debtor and sending in a late payment reminder as soon as possible. The best way to avoid any future issues is to ensure that you are on top of the tracking process.
Check your compliance:
it is imperative as a pre-collection company that your efforts are met with the standards set by compliance laws for collectors. It will be advisable that you consult your legal counsel to review your collection strategies and ensure that your methods are compliant with the code of conduct that is laid out for you.
What To Prioritize in The Process of Pre-Collection for Debt Collection
While there are myriad ways to ensure proper collection and a low delinquency rate, you must be aware of the pitfalls that might occur. Any gap in the pre-collection process can exacerbate the late payment issues.
But if you can keep certain interventions up to date and prioritize them within the process of pre-collection, you can avoid racking up delinquent or bad debt accounts that will eventually be escalated to collections sooner than they must.
Catch delinquency early:
As a pre-collection agency, there are some patterns that emerge early on within your debtors that are easy to catch and amend. If you are carrying out proper data analysis and reviewing debtor history, you will be able to distinguish signs of delinquency within their payment patterns. If an account has a recurring pattern of late payments, you should be able to identify and remedy the situation.
Train your staff:
It goes without saying that effective pre-collection methods are heavily reliant on the communication between your collection staff and your debtors. If there is an effective channel established between your debtors and your staff, they can detect early signs of delinquency and act accordingly. Spend extra time training your staff to take the initiative in cases of delayed payments and guide them to negotiate and communicate amicably but firmly with their debtors.
Know when to escalate:
If you have a specific account that has a history of delayed payments, and you are seeing a pattern emerging of bad debt, you need to have a system in place. You need to have a clear process in place that will determine how and when to involve collection agencies and escalate an account to the collection process.
Use technological tools:
In the case of pre-collections, digitization is your best friend. With the number of processes, you must establish and monitor, utilizing technology can help you expedite the process easily. Choose quality debt collection software and boost your customer relationship management to ensure you are effectively tracking customer accounts and streamlining the entire process for ease.
Document everything:
This is also an incredibly fundamental process you must establish from the get-go and update accordingly. If your accounts and their due processes are being documented properly, you will face fewer compliance issues, it will be easier to notice and assess payment patterns. You must keep a meticulous record of your communications with your debtor so that every process you carry out within the pre-collection process is legit and vetted.
Recover Debts Without Undue Complications
The goal of the pre-collection entity is to ensure that every account that is submitted and processed can be saved from going to collections. It’s like a rehabilitation program where your utmost efforts are spent preventing bad debt and legal repercussions for debtors. But it is also worth noting that a properly laid out pre-collection method can mitigate the risk of unrecovered debt or botched revenue.
If you can establish simple and precise steps to expedite your pre-collection process, you will essentially save many companies from losing their hard-earned money and will establish a relationship of goodwill in the long run as well. To ensure that your efforts are successful, having a stout, focused, and comprehensive process of pre-collection for debt collection in place is key.
