Recovering outstanding receivables is a challenge many businesses face, especially when dealing with clients who refuse to pay on time. For companies like TM Building, a licensed damage restoration firm based in Tucson, Arizona, finding the right debt recovery approach was critical. Thankfully, partnering with The Stevens-Lloyd Group, Inc., experts in commercial debt recovery, proved to be the turning point.
Joy Paul, head of PR, marketing, in-house collector, and part-owner at TM Building, has successfully implemented effective debt collection strategies with the help of The Stevens-Lloyd Group, Inc. Her approach combines rigorous research, consistent communication, and a solid partnership with debt recovery professionals. Here’s how you can do it too.
The Challenges of Debt Collection
One of the most significant hurdles Joy Paul encountered was clients providing excuses for not paying their invoices. Common reasons included claims that they never received a bill, incorrect billing, or incomplete work allegedly done by TM Building. Additionally, doing business with friends often resulted in unpaid invoices, and approximately one-third of her cases involved outright fraud.
To overcome these challenges, Joy teamed up with The Stevens-Lloyd Group, Inc., which specializes in commercial debt recovery. Over the last five years, TM Building has successfully recovered nearly all of its outstanding receivables through strategic and consistent efforts.
Tips for Effective Debt Collection
1. Follow Up Regularly
Weekly follow-ups on all accounts over 30 days old are essential. Consistency is key, especially for accounts that range from $7,000 to $9,000. Frequent communication keeps your invoices top-of-mind for clients.
2. Research Thoroughly
Conduct thorough research on all names in your database. This includes reviewing past payment records to determine when they last paid. Having accurate data will allow you to approach clients with factual information.
3. Keep Comprehensive Records
Maintain copies of all checks received and ensure they are correctly posted in QuickBooks or your preferred accounting software. Proper documentation makes it easier to reference past transactions.
4. Avoid Settlements or Discounts
Offering settlements or discounts on delinquent accounts can encourage more late payments. Instead, make it clear that full payment is expected.
5. Hire a Reputable Collection Agency
A trusted collection agency like The Stevens-Lloyd Group, Inc. can significantly improve your chances of recovering overdue receivables. Their expertise and network provide the leverage needed to encourage payment.
6. Attend Collection Law Seminars
Understanding the Federal Fair Debt Practice Act (FFDPA) and other relevant legal guidelines is crucial. Knowledge of legal requirements ensures you approach debt collection ethically and effectively.
7. Document Everything
Keep an extensive phone log and make notes of every conversation related to debt collection. Having a detailed record protects you in case of legal disputes.
8. Send Multiple Demand Letters
Send up to six invoices or demand letters clearly stating the status of the debt. This persistent approach makes clients aware of your seriousness about collecting payment.
9. Set Reasonable Deductibles
Having a reasonable deductible, such as $2,500 over five years, ensures clients are aware of the financial obligations associated with your services.
10. Define Past-Due Accounts
Clearly state that accounts over 90 days are considered past due. Establishing a clear deadline helps reinforce the urgency of the payment.
11. Issue a 10-Day Demand Letter
When legal action becomes necessary, send a 10-Day Demand Letter. This is typically the sixth letter in your sequence, giving the debtor 10 business days to pay before further action is taken.
12. Follow Up Promptly
On the 10th day, contact the debtor to confirm receipt of the 10-Day Demand Letter. This follow-up can motivate the client to take immediate action.
13. State Consequences Clearly
Make it clear that if payment is not received, the account will be sent to collections. Transparency about the consequences often results in quicker payments.
14. Recover Fees and Interest
Ensure your work authorization form or contract states that collection fees, attorney’s fees, and interest will be recovered if necessary. This clause strengthens your position if legal proceedings are needed.
15. Clarify Responsibility in Contracts
Include language in your contracts or work authorizations specifying that clients are responsible for payments if insurance does not cover the cost. This minimizes disputes over payment obligations.
Conclusion
Recovering outstanding receivables is a challenging yet essential task for any business. By implementing these 15 proven strategies, your company can improve its chances of successful debt collection. Partnering with a professional agency like The Stevens-Lloyd Group, Inc. offers additional support with its global network of attorneys and strong connections with embassies and consulates, making international debt recovery more efficient.
Take control of your debt collection process today. Contact The Stevens-Lloyd Group, Inc. for expert assistance and start recovering what you’re owed.
