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What To Do Before Hiring A Collection Agency

Apr 2, 2008
Businesses work hard to sell their products and services. But all of this hard work will not matter if you have customers who do not pay what they owe. Hiring a collection agency is a good way to collect money that is owed to you. However, you may want to take some preliminary steps before taking this step.

First, be careful when giving credit to customers and be sure to explain transaction terms completely. Credit references should be checked carefully and when extending the credit, customers should know what to expect and be clear on the penalties for late payment.

Be sure to send statements and payment reminders to customers promptly and send a series of regular reminders to a delinquent customer before hiring a collection agency. These notices will save money and will prevent the ill will that develops when a third party begins calling to resolve a debt. Also, a lot of delinquent customers may be faster to pay if they know that their credit rating will be hurt if they do not pay.

You can also call a customer if they are late with a payment. A small delay in payment decreases your chances of getting the money that is owed to you. Keep calling if the initial call doesn't produce any results.

Customers who are having financial problems usually pay the companies that are most persistent first. Be sure that you do not ask the customer if they have received a bill. This gives the customer an excuse not to make payment.

If you have a customer with a delinquent account, keep an accurate accounts receivable report. This report should contain every customer's name, the amount of money each customer owes and the lateness of the payment. This report should be updated about once a month.

There may be times where you may not be able to find a customer that owes money on their account. Disconnected phone lines and returned mail may mean that a debtor has left town or has gone out of business. You may consider hiring a 'skip tracer'. A skip tracer or private investigator can help track down the customer and these services usually cost less than fifty dollars.

Before handing an account over to a collection agency, set a firm due date for payment on a delinquent account. Give the customer a warning of the final payment date but don't extend that date.

You may end up hiring a collection agency if all other efforts fail. Collection agencies collect money that is owed. If you hire a collection agency early enough, they may be able to recover a large amount of the unpaid money. A collection agency will increase your chances of getting paid the money that is owed to you.

A collection agency uses computers, software and specially designed phone systems that are effective tools in recovering money from delinquent customers.
Collection agencies are usually paid a commission or charge a flat fee. Remember to only hire a collection agency to collect the debt from a customer if you no longer value that customer.

Hiring a lawyer is a last resort. Hiring an attorney to collect a debt may be the most effective way to collect a debt but it is also the most expensive.
About the Author
Tristan Andrews is a freelance author who writes articles about Collection Agencies and Collection Agency Quotes.
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