Sound collection procedures and processes do not always stop bad debt occurring. The important step is knowing how and when to increase the severity of the action to be taken to recover these bad debts.

Early communication with the debtor is on one of the key steps to ensure recovery of the debt.

This contact needs to be consistent and measured to determine what action mostly achieves the desired result.

There are various collection processes that can include:-

• personal contact with your client either face to face or via the telephone
• written demand requesting payment
• negotiation
• use of a debt collection agency
• legal action

Contact

Collection of your overdue accounts should be a daily task not just looked at when cash flow is poor.

Early contact with your client is more likely to address any issues that might be the reason for non-payment and provides the opportunity for discussion.

Depending upon the size of the debt and relationship with your client you may choose to arrange a meeting to discuss the debt with your client or simply contact by telephone.

Written demand

A written demand for payment puts your debtor on notice that payment is due and the debt is outside your trading terms. It simply needs to provide your client with the details of the debt, indicate the date payment is expected and advise your client that should payment not be made by the date indicated that you intend taking further action.

Negotiation

In the event there is a dispute between you and your client or your client is unable to pay in full it may be more beneficial to negotiate a satisfactory amount or arrangement that will see payment of the debt without further action.

Debt Collection agency

A Debt Collection agency can assist with collection of your debt. There are costs associated with using a Debt Collection agency and these need to be considered when deciding whether or not to refer your debt to the agency. You need to also consider what might be the costs if you do not refer the debt to an agency. If you have a debtor (no longer a client) who is not paying your account chances are they are not paying other creditors. In referring your debt to a Debt Collection agency you are likely to have the debtor increase the priority on payment of your debt.

Legal action

Should a Letter of Demand sent from the Debt Collection agency not be successful in inducing payment from your debtor legal action will be necessary?

Legal action can be complex but your agency will be informed on the legal process and know what action is best taken to recover your debt.

Pro-Collect Pty Ltd is a specialist Debt Collection agency that uses “Out of the Box” thinking for recovery of you debt.

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