A steady cash flow is crucial for any business. So, when clients or other business partners fail to pay you on time, it can significantly disrupt your operations. You may be determined to retrieve the money stakeholders owe you through debt collection. However, you must proceed with caution. A lot of business owners make serious errors when trying to collect debt. Mistakes can often make things worse and make getting what you are owed a lot more complicated.
Here are some examples of the most common mistakes businesses make when engaging in debt collection efforts:
1. Lack of documentation
If you do not have the proper records or documentation, it can make proving the validity of the debt someone owes you more difficult—record and document every agreement and communication with the debtor when initiating debt collection efforts.
A seasoned debt collection attorney can help you establish a robust documentation system and ensure you have all the needed evidence.
2. Not having a written contract
Enforcing a contract that isn’t in writing can be extremely difficult, especially when trying to collect on a debt. On the other hand, written agreements can be much easier to enforce and give both parties in the exchange something to reference if there is a misunderstanding.
You can work with legal debt collection professionals to help establish a sound and enforceable contract and ensure its terms are transparent to all parties.
3. Delaying action
The longer you wait to address unpaid debts, the harder they become to collect. Acting quickly and swiftly is often better if you want a better chance of success in your debt collection efforts.
Experienced and knowledgeable debt collection lawyers can help you devise a collection strategy that can minimize delays and help you focus on pursuing the money you are owed.
4. Lack of follow-up
Similarly to delaying actions, not following up with debtors regularly can slow down your collection efforts. Regular communication is key to keeping the issue prominent and demonstrating your commitment to resolution.
Working with professionals to put the right follow-up systems and strategies in place can help you prioritize your debt collection efforts alongside other business priorities.
5. Not communicating effectively
How you communicate with debtors can significantly affect your collection efforts. Not being assertive or reaching out infrequently can send mixed signals to debtors and potentially make them think your debts are not a priority.
A debt collection attorney can help you tell debtors that you mean business, all while following the rules.
6. Not knowing a debtor’s financial situation
Understanding a debtor’s financial situation provides insights into their ability to pay. Ignoring their financial situation can lead to unrealistic expectations.
Debt collection professionals can help you conduct thorough analyses to assess a debtor’s financial standing so you can better understand how much they have and how much they can pay.
7. Violating collection laws
The Fair Debt Collection Practices Act (FDCPA) sets rules and limits on how creditors interact with and contact debtors. Violating any of these rules, even accidentally, can make working with debtors complex and hostile. This can make pursuing your goals of getting what you are owed more difficult.
Debt collection lawyers are well-versed in the FDCPA and other consumer protection laws. They can help you ensure that your actions comply with federal and state rules and regulations.
8. Overlooking payment plans
Some debtors may be willing to pay but unable to settle the full amount immediately. If you are not considering a payment plan for these debtors, it could be a missed opportunity.
Seasoned debt collection professionals can help you find a suitable payment plan that works with your needs, as well as the financial situation of the debtor.
9. Underestimating the cost of collection
Debt collection can cost a lot of your time and resources. A lot of business owners don’t account for these expenses. When this happens, costs can add up faster than you would think.
A seasoned legal professional can help you find tailored solutions to minimize costs during the recovery process so you can get the most out of your efforts.
10. Trying to manage everything alone
Handling debt collection internally without experience can leave you feeling frustrated and unaccomplished. The process can involve many moving parts and pitfalls, and navigating its complexity can become a full-time job if you don’t have the proper support.
However, when you work with a seasoned debt collection lawyer, you can have someone by your side who brings valuable experience to the table and can help you maneuver the process with confidence.