Collection Agency Secrets for Collecting on Bad Debt

Getting worried that one of your clients, customers or patients will never pay? Have you given up on a customer who's essentially said he won't pay? Congratulations--being stiffed by a customer or patient is a milestone in the growth of a business or medical practice. But even the most hopeless of bad debts can sometimes be collected-collection agencies have been doing it for years. Here are six of their secrets.

1) Don't just call, write.
According to a leading collection agency, you're much more likely to collect on bad debts when you send a series of collection letters. Deep down, you probably know why collection letters are better. It's the same reasons that would make you uncomfortable placing such a call in the first place: 1) if a debtor knows why you are calling they will avoid your calls; and 2) if you do get them on the phone they will most likely have a bad attitude, or just make excuses like 'the check is in the mail' to get you off their back.

2) Don't ask if, ask when.
This leading also recommends that you try to get your debtor to set a date for paying you back. The people who owe you money may have been saying to themselves that they will get around to paying you any day now. But tomorrow never comes, which is why you need a specific date. When you call, start by asking to be paid today, then negotiate from there.

3) Be nice.
Courtesy is important because: 1) it lets you keep the moral high ground; 2) it makes it likelier that you can establish a cooperative relationship with the debtor for getting the debt repaid; and 3) there are very strong laws against harassment in the collections process and you do not want even to approach their limits.

4) Be cooperative
Remember: you and your debtor have one thing in common: you both want this debt to go away. In particular, you both want you to stop having to make all these calls and send all these letters. With that shared goal you and your debtor can work together to create a repayment plan. While a repayment plan may not be what you had hoped, it's better than holding onto a bad debt.

5) Know the value of your time
The one thing that is probably keeping you from collecting on your supposedly bad debt is your fear that the time you spend collecting the debt may not be worth whatever you will recover. This fear is justified; your time is valuable and maybe it would be better spent on getting new business.

But don't just let this fear linger in the back of your mind, fighting with the little voice that says you want your money. To get a rough idea of how much time you can afford to spend collecting the debt, and whether you have the time to do it at all, sit down and write out a rough estimate of the value of your time, the likelihood of collecting, and the amount you are owed.

For instance, let's say you are going to assign this task to an administrative assistant whose time is worth $15/hour. The debt is $1000. It is owed you by an old customer who is three months behind but has never been seriously delinquent before, so you say you have a 50% chance of getting the money, making the value of the collection about $500.

You divide $500 by $15 and find that your assistant could spend 33 hours collecting the debt before it lost your company money. However, you'd probably still feel a little unsure about whether it was all worth it. Your feelings would be correct: there's still the opportunity cost of all the work your assistant won't be doing to keep your business moving. To be safe, you can also estimate the opportunity cost at another $15/hour, which means you can only really afford to have your assistant spend half as much time, or 16 and a half hours. If you've already spent that much time already, it's time either to call it quits or call in the professionals.

6) Get a collection agency
The one secret the collection agencies know about collections is the value their services deliver clients. Unfortunately, businesses do not usually agree to write testimonials for their collection agencies or even recommend them to a friend. If you didn't know that there are small business collection agencies that will collect your bad debt for under $20, you have to admit that leaving your collections to the pros is a pretty good business secret. In short, you don't want your bad debt to cost you twice: once when you lose it, and again when you waste a lot of your or your people's time going after it. Going with a collection agency can help you avoid either outcome.

Steve Austin is a regular contributor to Let No Debt Remain Outstanding (http://www.let-no-debt-remain-outstanding.com/ ), a website with articles on choosing a collection agency, along with recommended the best collection agencies.

---

How Your Credit History Can Affect Your Life

Your credit history is an important aspect of your life.... Read More

Like It Or Not, You Have A Score To Settle! Part 1

Just when most people finish with school and can stop... Read More

Free Credit Report - Really

2005 marks the year that consumers will be able to... Read More

Five Debt Negotiation Facts

These five debt negotiation facts along with a few debt... Read More

Everything You Always Wanted To Know About Your Credit Report

Your credit report is a very powerful report that essential... Read More

How To Survive In A Plastic World, Qualifying For Credit Card

Let's face it, having credit is no longer a choice.... Read More

How A Prepaid Debit Card Can Help You Rebuild Your Credit

Consumers today are up to their eyeballs in debt. And... Read More

Tired Of Being Broke?...Learn How To Force Banks To Give You Money!

Imagine...obtaining credit that's incredibly easy...opening doors of opportunity you never... Read More

Using Credit Cards Wisely

"I think money was stolen from my card" or "I... Read More

All Is Fair In Love, War, and, Your Credit Report - At Least It Should Be! Understanding the FCRA

Fact: Over 150 million Americans have credit report with the... Read More

Bailiffs & Council Tax - Knowing What To Do

This article is about bailiffs who may call trying to... Read More

Credit Counseling -- Why It Doesnt Work For Most Debtors

"Cut Your Payments in Half!" the headline screams. "Consolidate Your... Read More

Why Consumers Need a Nationwide Credit Freeze NOW

What do a shoe retailer, an online discount broker, and... Read More

Pitfalls of the Credit Industry

The credit industry if rife with pitfalls. If you have... Read More

Inflexible Friends and Plastic Assets, Why Money isn?t Buying Love Anymore

Consumers reject financial advice in favour of financial frivolityIt would... Read More

The Hazards Of Your First Credit Card

You probably don't need me to tell you credit cards... Read More

Update Your Computer System With Bad Credit Computer Financing

The moment I placed myself in front of the computer... Read More

7 Surefire Ways To Repair Bad Credit

Do you have a poor credit rating? If so, you... Read More

What Are The Most Common Credit Card Mistakes?

Now in a world with so many easy to get... Read More

5 Steps You Can Take to Get Paid!

There are always some companies that have past due invoices... Read More

Good Credit is King, When Qualifying for Mortgage Programs

If you want to purchase a new home or refinance... Read More

Harassment of People in Debt by Creditors

HarassmentHarassment of people in debt by creditors or their agents... Read More

Credit Worthiness

Credit Worthiness is an important business and personal asset each... Read More

Understanding the Function of Credit

What is Credit?Credit is the backbone and the engine behind... Read More

Have You Ever Opened a Checking Account?

Maybe some of you are saving it in your trusty... Read More

How to Avoid Credit Card Late Fees

Everyone hates late fees and being late will cost you... Read More

How You Can Help Prevent Identity Theft

How can I prevent Identity theft from happening to me?... Read More

Credit Cards For People With Bad Credit Scores

Sometimes life lands you in a situation that causes your... Read More

Bad Checks, Bounced Checks, & NSF Checks

Negotiable instruments like checks and drafts have become an indispensable... Read More

Why Your Credit Score is Important

Your credit score can either haunt you or reward you.... Read More

Check Your Credit Before Shopping For That Home Loan

Review Your Credit Score.Nearly every bank, credit union, and mortgage... Read More

Ten Steps To Building A Good Credit History

Are you thinking of buying a house? Do you want... Read More

Top 5 Reasons To Check Your Credit Report Regularly

#1 Make sure mistakes aren't hurting your credit.Reviewing your credit... Read More