Debt Recovery Programs

Businesses often decide to use debt recovery programs to collect outstanding payments from delinquent clients. When customers don't pay, income drops and the company suffers. Time is precious. Owners can't spend hours each day trying to collect delinquent payments. But the money is necessary. Company loans and ongoing bills need to be paid. Many don't know where to even start. If not handled, debt can easily rise to an unmanageable dollar amount.

Recovering debt is not an easy task for any business, large or small. It involves two detailed processes: negotiation and recovery. Most business owners or, if the company is large enough, an accounts payable person will contact the customer via phone or mail to make the aware of the debt and discuss a repayment plan. Many times, reworking payments to fit the customer's budget is all that is needed. Other times, businesses will agree to settle, writing off a portion of the amount due. The Bible tells us to be willing to forgive the debts others owe us. "And when ye stand praying, forgive, if ye have ought against any: that your Father also which is in heaven may forgive you your trespasses." (Mark 11:25)

Recovery involves the actually collection of funds. Preferably, this happens out of court, which should be a last resort. Small amounts, under $2,000 are usually written off. Delinquent payments between $2,000 and $6,000 can be taken to small claims court. A letter is usually issued to the delinquent client, who then has 28 days to pay off the debt or reach an agreement with the company. If no agreement is made, then a hearing must be scheduled. Legal actions can be taken against individuals, partnerships, businesses and corporations. Although the cost of filing and issues a claim is small, the procedure can be very daunting. Debt recovery programs can take the stress out of the negotiation and recovery processes and even assist with legal proceedings if necessary. Using standard collection agencies are the most popular. But there are many other types of programs available.

Most debt recovery programs work with a company to collect overdue payments, but leave control in the hands of the business owner. Agents work with the owner to prioritize a list of clients who have a reputation for nonpayment, and then with the accounts payable person or department to contact individuals on that list, set up repayment schedules or work on some type of agreement for partial payment. Many agencies have attorneys on staff to ensure that the legal requirements are followed in collecting debt. These agents will manage all communications with the customer from the beginning: phone calls, letters, negotiations, and follow up calls. If legal action is necessary, they will work with the business' attorneys to build a solid case. With the help of these debt recovery programs, companies often receive repayments faster which boosts their cash flow sooner than if attempted without outside assistance, leaving business owners with more time to focus on their businesses.

However, companies need to take caution in selecting an appropriate service. Debt recovery programs represent the company and can give that company a good or bad name in the industry. No business owner wants to gain a reputation for either extreme - either being too rigid to work with individual situations or being too much of a push-over. Finding that balance with a program can be difficult. Some agencies, known as strong-arm firms, can really overwhelm clients. They fight against establishing a middle-ground plan that might work for an individual. As a result, the individual may never again seek services from the business. Professional agencies have a straightforward approach and are able to be specific about payment needs without applying force to a situation. These agents come across as more as a liaison in trying to achieve a settlement that works for both parties involved. Another consideration in selecting among debt recovery programs is cost. Some agencies will charge a flat fee while others will only request commission on the monies retrieved. Also take into consideration an agency's recovery rates - how much success they have had in recovering debt from customers. Agencies that have higher recovery rates usually will charge more for their services, but they will often get better results in the long term.

Another option for people seeking debt recovery programs is to invest in software packages that specialize in this specific need. There are literally hundreds of programs to choose from and the number continues to grow as computer technology advances. These software programs contain personal information on all clientele. When a customer turns delinquent on an account, the system has the capability to automatically turn them over to a collections service, almost immediately, with little effort. Many programs contain a guided interview with easy to answer questions that facilitate information management. It allows inexperienced business owners to manage outstanding payments without outsourcing. However, when choosing software packages, entrepreneurs must make sure that they choose a system that works with current operating systems and databases as well as programs that are being outsourced to other companies such as letter mailing services or electronic funds. Software packages are available in keyboard and graphical-interface systems, so skill level and technical knowledge of employees must also be evaluated. Using this technology can drastically reduce the number of delinquencies and it's virtually paperless.

The best practice in choosing among debt recovery programs is to select one based on the specific services and needs of the individual company. Keep in mind that not every program will work for every business. Some will find that a full agency serves their needs best while others may choose a software package. Whatever the program selected, the important thing is to find the balance between getting what is due and losing a business. Working with customers whether they be individuals, other businesses or large corporations can go a long way in developing lasting relationships that will carry into the future.

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