You are a professional who is able to prepare accounts collections letters and mail them. Unfortunately, that’s just one of many steps in the debt collection process. You need to track down the person or company who owes you the papers and make sure the letter is actually delivered.
You’d be amazed at how much easier this will get with our 3 simple accounts collections tips!
Best Collection Methods And Procedures: Start With The Amount Owed
Generally, you can afford to invest more time and effort in collecting larger sums than you can smaller ones. Any accounts collections procedure should begin with the amount owed. That said, don’t be in a hurry to write small balances off because they can add up, but don’t be too persistent in your efforts either. The outcome of either approach can lead to unprofitability, the latter through escalating recovery costs, and the former – through direct loss.
Snippet: Data of the Credit Research Foundation show the value of the receivable falls dramatically as a function of time. The longer the money has been owed, the less likely you are to get it back.
Another issue to consider is the pattern of payment. Has your client made any real effort to repay their debt? How long have they been a client? (If you have a new client, always make your accounts collections policy clear from the get-go.)
If they’re not new, take previous dealings with them into account. Have they lived up to their commitments in the past? Has their account ever been closed?
Principles of Collection: Accounts Receivable Collection Techniques
There are four pillars of accounts collections, so to speak. Apart from the actual collection, there is systematic follow-up, discussion, and preservation of goodwill.
The debtor is obligated to make payment within the terms of your agreement, and your job is to ascertain this obligation is fulfilled. Your client may be having financial troubles at the moment, but this won’t last forever. It is important to preserve goodwill in one’s accounts collections efforts. This requires knowledge of the industry and the customer, but mostly, it requires tact. One of the advantages of hiring an accounts receivable collection agency is that they can develop and utilize these techniques in the best possible way.
Accounts Receivable: Best Practices
How are accounts collections best carried out – in person, by phone, or by mail? Before you start making accounts receivable collection calls (undeniably among the least costly approaches), make sure you have enough information to complete the call. This includes invoice details, purchase order and/or contract numbers, credit memo detail, related correspondence, unapplied checks, previously disputed open items, and any shipping or billing instruction copies. This data may also need to be provided to a collection agency should you decide to contract one.
Also, take the time to review and update your credit file for recent data on your client’s paying habits with your company. Review their financial status and operations. This may help you find out why they are not paying, enable you to ask more pointed questions, and customize your payment request to ensure a better outcome.
Specialists tend to agree that face-to-face collection is the best method because you obtain the most information this way. Telephoning can be very effective as well. It’s fast and gives the collector the chance to really listen to what their client has to say. Still, watch out for excuses, i.e. the product was defective or returned, the system isn’t working, or the accountant is on holiday.
Keep a neutral tone and don’t express strong emotions even if the client gets abusive. Stay calm and businesslike, and resume the conversation when the client calms down. They will eventually – most clients are reasonable people who will respond to rational arguments, such as that paying off collection accounts will improve their credit score.
Consider the Accounts Receivable Collection Period
When we say “accounts receivable collection period”, we are referring to both the statute of debt limitations and the average collection period of accounts receivable. To put the former in layman’s terms: How long before a debt is written off in Australia? Simple contract debt has a 6-year limit in all AU states (QLD, etc.) with the exception of NT (3 years). The statute of limitations is a deadline for filing a claim in court. Note the court’s judgment can affect the statute of limitations – if the court rules in your favour, it is 12 years throughout AU with the exception of VIC and SA (15 years).
Accounts receivable debt collection periods can have a gigantic impact on your organization’s cash flow. These periods are measured in so-called average debtor days. The average accounts collections period is calculated by dividing the average accounts receivable balance by total net credit sales over this term and then multiplying that by the number of days in the period.
This involves how many days have passed between when the credit sale was carried out and when the amount was repaid. The period is best evaluated over time – for example, a collection period of 20 days would be acceptable if invoices were issued with a one-month due date. However, excessive repayment periods will put your organization at financial risk. A 2017 survey by Digital Finance Analytics of 52,000 small and medium AU businesses found that over half had an average collection period of just under two months. What’s worse, this is increasing year on year and having a series of adverse effects on companies’ working capital.
Hire an Accounts Receivable Collection Agency
It can be tricky to get a debtor to fulfil their repayment obligation, particularly if they’ve skipped town without leaving a forwarding address. In your desperation, you might consider writing off the debt. Don’t let it cross your mind! You’ll find an agency will alleviate the accounts receivable collection process greatly.
How? Collection agencies employ professionals who use a variety of effective tactics like skip tracing (tracing people who skip town). In the days of the Google Almighty, finding someone has never been easier. Public and private records are available to these agencies. Of course, public records are available to everyone – for a fee. You will have to deduct such fees from the debt owed, while an agency will make you a lump-sum offer that could include fees to check records.
Below is some information you may find useful in your efforts to track your debtor down. Keep in mind that this process is very time-consuming and involves managing a lot of details apart from paying fees.
Land and property sales are public record, as are marriages, births and deaths. Knowing someone has recently had a child or got married can help a company locate a debtor that has gone AWOL. You can find information about all this in newspapers, through government offices, or online. You could also search public bankruptcy records in the accounts collections process.
You can try looking up current or former business owners using an Australian Business Number (ABN) or their company name or number. Anyone can do a quick search with the ABN Lookup Tool. Listings with executive summaries, directors’ profiles, staff lists, key staff members, staffing changes, new member announcements, and industry awards can be a rich source of accounts collections information.
Information from each state agency enters the database of the National Exchange of Vehicle and Driver Information System (NEVDIS). Those trying to track down a debtor can do a quick search on the latter’s chassis number or VIN.
If you have a photo of your missing client, try uploading it and Google will give you a list of sites where it’s been used. You could also search for someone on Facebook, Twitter, Instagram, LinkedIn, and Flickr. Don’t limit your search to Google – Bing, Dogpile, Yahoo, and DuckDuckGo can be helpful too. Many online apps perform search functions as well.
Your debtor may have moved to another country – in this case, choose search engines commonly used in the country where you believe they could have gone. Popular search engines in China include Baidu, Easou, 360 Search, WeChat, and Sogou. In India, people use Khoj, Epic Search, and Rediff.
Collection Agencies – Why Us?
The process of accounts collections is very protracted and cumbersome. Ideally, you are a patient, methodical person who is good at managing details. The internet does provide a wealth of data and a lot of it is free, but you need to give yourself quite a bit of time to this end. An individual or organization that’s in a hurry to recover missing debt doesn’t always have this time. People find themselves crumbling under the pressure, especially if the accounts receivable collection period has become excessive and outstanding debt is threatening their company’s very survival.
A collection agency will deliver much quicker results.
Customised Collections Solutions
Our customised accounts collections solutions can help organizations reconnect with existing clients faster. We can also help you prioritize your approach by being better equipped to predict which clients are most likely to pay. We have access to court records to help you evaluate the history and financial status of new clients. Our well-sized, current, and comprehensive credit data bureau offers excellent prospects and insights.
Locating debtors: A problem no more!
Whether you want to locate a debtor, recover on bad debt, or decide which debt to sell early in order to maximise your revenue, just give us a call. Our accounts receivable collection agency can be your primary debt recovery tool, revealing your debtor’s history with other loan providers. This will make it possible for you to segment your clients, make accounts collections a priority, use your resources optimally, and, most importantly – find your debtor and ensure your letter is received!
We can also provide an expertly summarised file to segment clients and a detailed report on each one to help you establish which debt can be collected. With us, you will have peace of mind knowing the most up-to-date and useful data is at your fingertips, allowing you to make smart debt management decisions.
We are able to make a variety of facts about your debtor known, such as change of name, address and job details, whether the person was a director at a company in the past or is now, data on loan defaults, past mortgage and recent credit enquiries, and more. Our search service, designed specifically for the debt collection industry, is fast, user-friendly, and accurate. It can help your business save precious time and money by locating missing debtors. With a large number of data categories and information sources, it also helps identify economic growth opportunities with a more detailed picture of your clients and target markets.
Advanced Reference Tools
Our advanced people, record and business search tools and cross-referencing capabilities help us verify the most current insights from one of AU’s biggest and most reliable data centres. We’ll help you avoid wasted accounts receivable collection calls and letters by only searching accurate and current data.
One question many debtors often ask is how to remove collection accounts from credit reports. Did you know they can’t do this without your permission even if they repay their debt? We can provide you with many details around this aspect. Our specialists know the applicable laws governing the area of accounts collections. We’ll help you improve your understanding of client risk profiles and create better management strategies with credit scores.
Single Interface Search
Using your client’s last known name, address, or phone number, we can find proprietary legacy data and data from commercial sources, the Australian Bureau of Statistics, and historic address records. We also use bankruptcy judgments, survey data, Australian Business Research (ABR) public data, marketing data, and Google Maps.
Finally, property and land sale and rental data can indicate movement within an address to find the broker, who can prove to be an excellent source of information.
As you can see, we have a wealth of data and records at our disposal. Contact us now to learn more.