So here is the situation, you extended credit to a new customer for a large amount. You were excited to have the business, as any business would be, but you did not perform the due diligence. Everything seemed to line up, they had a website and looked like a good company. Now 30 to 60 days later, they have not payed and you are out the merchandise. Sound familiar? It is not a fun situation, but how do we rewind and prevent this mess from ever happening.
The first step in the whole equation is to perform some research on the company or individual. There are many online credit reporting services that will perform a search. This search will bring up any red flags. These can be the signs that prevent you from getting yourself into a debt collection nightmare. Some of these signs include: court judgments or summons, credit inquiries, and written off accounts. These red flags should be forewarning that no credit should be extended to this customer. If you are dealing with a troubled customer, then require them to pay cash or go elsewhere. This may keep you from making a couple of sales, but will be well worth it in the long run.
I have known many customers who were doing good business with a customer for years and all of a sudden this trusted customer was unable to pay. A big problem with this is that over time the amount of credit that is issued to a customer gets larger and larger. If you have a good relationship with another business, then you will be more likely to extend larger terms of credit. So how do you prevent this from becoming a trouble spot for your business? It may seem like this is tough to prevent, but there are some key warning signs that can foreshadow impending financial trouble.
Some signs to look for with current customers are the payments coming in regularly? If they are sliding from 30 days to 45 and so on, then this should be a red flag. Then you need to tighten the terms of credit to protect yourself. Is the company not paying in full? If they are only making partial payments, then you need to be cautious. Look for any changes in their payments, whether timing or size, because this can predict financial troubles.
Be on the look out for trouble spots before you make a sale and afterward. Forewarned is forearmed.
Transportation is a part of business. How do you get your product to the right place at the right time? There are many options to use for transportation and not all are equal. A big problem that many shippers run into is not being paid on time.
Shippers move items from point a to point b. The items are not theirs, but are shipped by companies and individuals who agree to pay the shipper for their services. The average consumer has to pay for these services beforehand and is not able to pay on credit. The larger volume shippers are able to ship on credit because they represent a larger portion of a shipper’s business.
Transportation debt collection is necessary for businesses when one of these large customers does not pay for their shipping services. What makes things interesting is when this involves international shipping and the parties are from different countries. Laws change as you cross over border lines and this makes collecting transportation debts a challenging process. Whether this involves a cargo ship or cargo airline, the challenge is finding out who is on the hook for the unpaid funds.
A good transportation collection agency will be able to track down these people and motivate them to pay. What makes collecting transportation debts difficult, is that not every country has the same laws as the United States. It is much easier for a debtor to hide behind country lines. Phone service and means of contacting the debtor may not be as reliable. So how do you collect an international transportation debt? The best thing to do is to turn the account over to a specialized debt collection agency with forensic corporate debt collection capabilities. This will give you the best chance in collecting the overdue debt. You can try to collect the debt yourself, but when you cross international border lines the complications grow exponentially and it is best to let a true professional organization handle the claim.
Commercial debt collection
Commercial debt collection is a process, like all business is, and if this process is not perfected then the business has a greater chance of failing. We will look at some of the most common pitfalls in regards to collecting business debts, which are all easily avoidable. The goal is to help you and your business get paid on time and to profit for years to come.
The first pitfall with commercial debt collection is not having a plan at all. The plan does not have to be too intricate, as long as you have a plan of action. At 30 days do you send a letter reminding the customer of the outstanding debt? At 60 days do you call? At 90 days do you turn the debt over to a collection agency? These are basic actions and deadlines that need to be addressed. If you are able to do this, then you are well ahead of the curve.
A second pitfall is not delegating debt collection properly. This is common in any small business, because staffing is usually tight and employees are forced to handle multiple roles. The biggest question that you need to ask is, would I be better situated letting someone else handle this? It does not have to be a 3rd party collection agency, but possibly someone internally can do a better job. Do not send an engineer to change a light bulb. You will be better situated doing what you do best, and that is focusing on your business. True, you can handle your businesses commercial collections, but it will cost you more than hiring a collection agency. Collection agencies exist due to this fact, they earn their keep. Once you have found a commercial collection agency that is professional and does a good job, then it is imperative that you setup a working relationship with them. Make sure they understand what your business needs and that they understand your specific industry.
Commercial collection agencies are there to help businesses of all sizes collect their debts and get back on track with their operations. Do not let bad debt and outstanding accounts slow you down. The key with debt collection is to act sooner than later, because you never know when a company will default on your account and you will have a harder time getting paid.
Today we will talk about the importance of having a D-Day or decision day in regards to debt collection. This is the day that you move forward in the collection process and start actively collecting the debt. If you do not have a deadline for collecting your debt, then you are liable to get your company into some difficult financial situations.
It has been proven time and time again, that the sooner you start the collection process, the more likely you are to collect the debt. Most people think of this evil process when collecting debt, but it does not have to be this. You can send a letter out or just make a friendly phone call to the debtor or business. This is just a heads up and to let them know that you expect to get paid. You would be amazed at how many businesses do not do this.
Take the time to setup a plan of action for your old accounts. It may take a couple of hours or days, but it is well worth your time and effort. You can even work hand in hand with a professional collection agency to setup the right strategy for collecting your debt. If you find the right collection agency, then they can work like an in-house agency. When they know your expectations, they can better serve you and help you keep your customers.
Many businesses worry that they will scare away their customers if they proceed with collections. This can be true, but if you keep their needs in mind you have a better chance of keeping them.
So when is the best date to start the collection process? As a rule of thumb, you better turn over your accounts no later than 90 days. This ensures that you will get paid. The longer you wait, the less of a chance that you can collect. If you act at 90 days, you have a better chance of your account rising to the top of the stack. You are not the only person who would liked to be paid. Keep this in mind and act sooner, rather than later.
Good luck with your debt collections and let us know if we can help you.
Debt collection is important for all businesses, but it is much more important for small businesses. A large business or corporation can better weather the ups and downs of economic cycles, because they have more financing options. Small businesses on the other hand may not have as many options and one bad debt can send the company into bankruptcy. (more…)