What can debt collectors do if customers don’t pay

If you’re in business, chances are the bulk of your invoices are paid on time, or better still, ahead of time. Outstanding invoices, though, can well and truly bring your business down. They can open up a cash flow gap which can impede your business and demand attention and time that you simply don’t have. Worse still, outstanding debts can threaten the survival of your business: the Australian Securities and Investment Commission cites poor cash flow as a factor in 40% of business failures

Engaging professional debt collectors can save you time, money and headaches – not to mention keep you out of that 40%. They can not only assist in the recovery of funds, but can help you set up the right systems and processes to improve your business’s short and long term cash flow.

 

So, what can a debt collector do if a customer can’t, or won’t pay their invoice?

A professional debt collector can bring specialist experience and ethical expertise to collect your money. They have access to industry leading technology and bespoke debt collection techniques so they can recovery your debt as fast as possible.

 

Final Notice Letter.

When you acquire the services of a collection agency to manage your debt, the first action they generally take is issuing a “Final Notice Letter” using company letterhead. This letter should be preceded by 1-2 friendly reminders from yourself either via email, letter, or both.

If the “Final Notice Letter” isn’t successful in reconciling the debtors account, a formal ‘Letter of Demand’ is then issued. A Letter of Demand is drawn up by a solicitor and sent on the solicitor’s letterhead, which generally evokes a response and your debt is paid in full.

Tip: It’s important that you are aware of all the fees and charges associated with using a solicitor, and to whom they should be attributed. Working with a debt collection company on your terms and conditions of trade document (used as a letter of engagement for any new clients) will ensure that the responsibility for these costs lie squarely with the debtor.

 

Follow Up

If no response is received from the Letter of Demand, your debt collection company will continue to contact the customer in an effort to arrange immediate payment of the full amount without incurring legal action.

If the debtor can’t or won’t pay the full amount immediately, you then have two (2) options.

1. Negotiate a payment plan
2. Start legal proceedings.

 

Negotiating Payment Plan

Depending on the situation and to help preserve client relationships, an agency can negotiate a payment plan that works for you. Believing your customer is just experiencing some short-term cash flow problems and will be able to settle their debt, offering a suitable payment arrangement is an easy solution to resolving the matter.

 

A payment plan could be;

• Agreeing to a formal repayment arrangement, with regular installments to be completed until the debt is paid in full.
• Taking security in exchange for time to pay. Security usually comes in the way of continued supply of goods or services on the customer’s behalf.
• Negotiating a discount on the invoice in exchange for immediate payment.

 

Legal proceedings

If the debt collection agency doesn’t believe a payment plan would work, the next step is then to start legal proceedings.

Your collection company will have the resources needed to implement legal proceedings to recover the outstanding money. They will be able to list a default on the customers’ credit history (if they are a company or a business), file the required legal documents with the courts on your behalf and then represent you in court.

 

Taking care of your business

Good debt collection companies will exhaust all avenues before commencing legal proceedings on your behalf. They will deal with your customer in a professional and ethical manner to ensure the relationship remains intact. Better still, a debt collection company will give a clear road to take – with confidence – when customers don’t pay.

If you’re looking for reputable collection agency, get in touch today as you’ll have Australia’s leading debt collection company on your side.