3 Debt Collection Techniques That Will Greatly Increase Cash Flow To Your Business PDF Print E-mail
Written by David P. Montana   
Friday, 18 December 2009 01:06
Effective debt collection techniques are necessary to any business, regardless of the state of the economy. Knowing how to persuade your customers to pay their delinquent, past due accounts on time will increase cash flow to your business. After all, as a business owner, you have debts to pay as well. Absent the necessary adequate cash flow, you are risking falling behind on your own bills and commitments. This can lead to problems with your vendors and suppliers. Or to the loss of favorable credit terms with your banker or lender.
by DavidP.Montana


Effective debt collection techniques are necessary to any business, regardless of the state of the economy. Knowing how to persuade your customers to pay their delinquent, past due accounts on time will increase cash flow to your business. After all, as a business owner, you have debts to pay as well. Absent the necessary adequate cash flow, you are risking falling behind on your own bills and commitments. This can lead to problems with your vendors and suppliers. Or to the loss of favorable credit terms with your banker or lender.

Learning how to master your debt collection techniques can mean the difference between surviving and thriving for your business.

Here are 3 important debt collection techniques that will improve cash flow in your business:

1. Amend Your Payment Terms

Be sure to state clearly on all your invoices and any provided quotes what your payment terms are. Many businesses permit 30-60 days before payment is due. Perhaps you should consider reducing the payment terms to 14 days, or 21 days.

Amending your payment terms can mean that you could potentially be receiving your money sooner rather than later. It also means an unpaid account becomes delinquent within a month so youre within your rights to commence collection services before too much time has elapsed.

2. Written Statement Reminders & Follow Up Calls

Once an account has become past due, you can issue a written reminder to the customer to gently encourage them to pay their bill to your business. You need to be very careful with the wording you use in your debt collection letter, as the laws surrounding debt collection techniques are quite specific. Sending a written correspondence means you have a record of your attempts to collect the outstanding debt in case of future issues arising.

You should also call the customer to remind them of their outstanding debt, as well as establish a time frame when you should expect payment. Again, your choice of words and overall communication needs careful consideration, to avoid the appearance of harassment.

Under the Fair Debt Collection Practices Act (FDCPA), debtors are afforded certain protections. Make sure you follow these laws and guidelines, whichever methods of contact you choose.

3. Outside Collection Agencies

Sometimes it doesn't matter what you do, some of your debtors won't pay their debts. Even if they are going through some financial difficulties themselves, this still doesn't help your business if they've already received goods and/or services in good faith, and are no longer able to pay their bills.

After you've exhausted all internal efforts and avenues of debt collection, its then time to contact a third party collection agency to pursue the outstanding account for you.

Debt collection agencies are experts, and well experienced in the area of collecting past due monies. They are also fully knowledgeable of the laws, guidelines and regulations governing their industry. Representing your business, they will act on your behalf to collect the outstanding debt owed to you. The debt collection techniques used are designed to bring positive cash flow back to your business, sooner rather than later.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

David P. Montana has written, lectured and served as a business consultant on the subject of collection agencies for three decades. David would like to hear from you, and invites you to write about and tell your success stories, as well as challenges, issues and concerns with debt collection techniques.