Companies hoping to improve their collections processes may want to look at new technology for help. A recent InsideARM report suggested there are several solutions, including personalized URLs, or PURLs, and virtual negotiators to help retrieve electronic payments.
Businesses know that collecting debts from clients is a difficult and frustrating process, especially considering that many customers are combative every step of the way. While there is no clear-cut solution to ensure payments are always received in a timely fashion, options like collections software can help companies improve their operations and maintain more accurate data.
Commercial litigation expert Peter Yarem recently suggested that companies can improve their collections processes using other methods as well, including follow up phone calls. The writer indicated that initial attempts to retrieve payments will likely fail.
"Therefore, it is important to follow up," Yarem wrote. "Because it is often easy for clients or vendors to ignore a demand letter, it is sometimes more effective to contact the client or vendee directly via telephone. If you are dealing with a large company, the accounting department is a good place to start, although you may have to escalate your demands up the chain of command until you find someone with the authority to settle the debt."
The expert added that businesses should avoid coming off too strong and aggressive when trying to retrieve payment by avoiding upfront demands. Instead, even partial payment can help companies on their way to more success down the road.
While organizations may be eager to get the ball rolling and get their money as quickly as possible, successful records management is also needed. Yarem noted that companies must keep accurate written files of telephone calls and anything related to their collections processes should legal recourse be needed.
This last area is one that can be aided with the use of collections software. Experts agree that these solutions help businesses keep accurate data at all times to ensure information is readily available.
Organizations of all types have something in common in that many are struggling to collect payments from their clients. Although consistent follow ups can help ensure customers remain updated on the status of their debts, some are just stubborn and refuse to pay what they owe. But there are some ways that businesses can stay on track and do all they can to collect what is rightfully theirs.
Litigation expert Peter Yarem recently offered companies several tips to help their debt collections process. The writer noted that unpaid client bills can significantly hamstring a business, making it essential for organizations to have proper methods and policies in place to protect against such situations.
Companies should do their best to retrieve some payment, even if it is a small amount, to help with the litigation process down the line, according to the writer.
"Where you have previously invoiced the client or customer, if you eventually wind up in court, obtaining some payment on account – even a relatively small payment – will go a long way in convincing the court that the invoiced amount was owed in full and that you are entitled to judgment on an account stated," Yarem wrote.
The expert wrote that the next step to help companies improve their collections process is to send a letter to clients demanding the debt is paid. The message should include details such as the amount that is owed and an overview of late penalty policies.
Taking clients to court over unpaid payments is a costly solution, but businesses seeking cost-effective ways to improve their collections infrastructure can adopt collections software. Experts agree the systems offer a number of benefits, including more accurate customer data, and help companies integrate their old platforms seamlessly.
Organizations that have to collect client debts are struggling to do more with fewer resources, according to an IT consulting firm. The company surveyed 100 participants and found that even though the number of debt cases is expected to grow by 20 percent, they are still finding difficulty cashing in on this trend.
Of those surveyed, 85 percent agree debt collections require more than just people and resources, while 83 percent said these processes are costing their organizations more than ever before. Another 81 percent of participant said their debt collections are taking longer than expected, leading to increased costs, and nearly three-quarters said their margins are suffering because of extended time frames.
To address this development, more than half of respondents expect their companies to hire extra help, while 54 percent may outsource their software solutions.
"This survey has highlighted the fact that the challenges businesses face with debt collection are immense, and the debt collection situation is rapidly worsening," the firm's software director Elliot Howard said. "The high number of respondents recording big challenges here is extraordinary. Debt collection is absorbing more resources and increasingly becoming more complex and difficult."
Since debt collection is such an important part of many companies, there are ways to improve the process and ease the headaches. With collections software, businesses can streamline their operations and keep accurate client data to ensure they stay on top of their customer payment dates.
Industry research has shown just how effective collections software can be. One vendor conducted a survey of its customers and found that 80 percent said they would use collections software in the future because the solutions are helpful collecting client payments.
Companies across all industries know how tedious and frustrating collecting client payments can be, but there are many options available to lessen this burden. An organization can notify its customers days in advance of when their money is due or continue following up so clients know time is of the essence. Another effective strategy simply involves being pleasant. But not every method is successful and technology and service providers may help break down potential barriers.
A recent InsideARM.com report highlighted how businesses can improve their collections processes by establishing a relationship with collections software vendors.
"A key piece to these processes is making sure you have a vendor partner that can interface with your collection software, allowing the new information to automatically update your system at the account level," the report stated. "This will ensure smooth work flow and not consume valuable IT resources in your organization. Lastly, you will be assured that subsequent correspondences are being sent to the debtor's most current address information."
While many companies want to put pressure on their clients to pay their debts on time, coming off too demonstrative can impact how effective businesses are in collecting what they're owed.
A national debt collection firm recently announced that organizations with a "nice people collect more" mentality are more likely to retrieve what is owed. In fact, this method of retrieving consumer and business payments is up to 40 percent more successful than other processes.
The vendor suggested that this procedure is a significant departure from how organizations traditionally attempt to collect debts from consumers or companies, which have come under increased scrutiny in recent years. In fact, the Federal Trade Commission received nearly 20 percent more debt complaints in 2011 compared to 2010.
If there is anything consistent about collecting debts, it's that companies are always struggling to receive client payments when money is due. Small and medium-sized businesses especially may find difficulty holding customers to their obligations. But with collections software, organizations can streamline their operations and ensure they have all the necessary resources to follow up with their clients.
But there are even more methods SMBs can use to improve their collections tactics. Small business and collections expert Jeff Wuorio has suggested several ways SMBs can make sure their clients pay what they owe when they owe. While it may seem like a cold move in the short term, credit action may have long-term gains. SMBs are encouraged to contact their state's credit bureau if they are unable to retrieve debts.
"They'll provide you with the means necessary to make the bad debt part of your opponent's credit record," Wuorio wrote. "While that may seem like cold comfort now, it may offer valuable leverage years down the line when a bank or other lender refuses the offender a loan because of the bad debt. That may prompt your less-than-reliable customer or client to make good on what's owed you to clear up the credit report."
A recent Business 2 Community article also highlighted ways SMBs can collect debts more effectively. The news source asserted that invoices must be sent before a customer is scheduled to send payment. Waiting until after this deadline leaves companies with less leverage. If needed, businesses should send invoices requesting a percentage of what is owed so they recoup some of the costs associated with delivering a particular service or product in the short term.
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Companies fed up with their clients failing to make payments may turn to litigation as a last resort. But when should a business make this move? According to the Credit Research Foundation, organizations are encouraged to remain calm during this process.
"Never threaten a customer in writing or orally that their credit reputation will be ruined if they do not pay you," the CRF said. "In the first place, you are not telling them something they do not already know, and secondly, you could be sued. Also, do not threaten legal action unless you are fully prepared to follow through, and have received the necessary approval from your management."
The organization asserted that a final demand letter should be concise, serious and to the point. The letter should be addressed to a certain individual rather than a department and written as if an oral conversation is taking place.
When sending out a final demand letter, businesses should state that the next step in the process to retrieve payment is litigation. Also, the CRF suggested sending the message using an overnight carrier so the client must sign for the package, which also is helpful in conveying the urgency of the matter.
The CRF concluded that there is no particular time frame regarding when a company should turn to litigation for its collections. If a customer has avoided contact for weeks, then it may be time to speak with an attorney or a collection agency for extra help.
There may not be a clear answer for every debt question, but organizations can improve their operations with collections software. Experts agree that these solutions are valuable tools to streamline collections processes and keep track of client information more effectively by integrating the technology with previously established systems.