What Is The Maximum Amount Of Time You Should Give Your Commercial Debtor Before Outsourcing To Collections?

Image courtesy of dougbelshaw / .flickr

There are many factors that affect the amount of time you should give your commercial debtor before outsourcing to collections, but the maximum amount of time is six months, and this time frame applies to large accounts or for those with whom you've had a long-term and positive relationship.  By the time the debt has remained unpaid for six months, you will have provided more than enough time for a business to come up with the means to pay off the debt.  For newer customers, or for businesses that have been slow to pay in the past, you shouldn't wait that long. 

Keeping in mind that the longer you wait, the harder it typically is to recover the debt, you might consider giving loyal customers a bit of a break before outsourcing their commercial account to collections.  This is especially true if the commercial debtor has been honest and forthright in communications or in attempting to pay the debt.  If the debtor has ignored your attempts to resolve the unpaid debt, or has promised payments and did not come through, you should consider speeding up the process of outsourcing to collections. 

If the commercial debtor has a large account and you have reasonable hope that the debt will be paid within six months, then you might want to hold off on legal collection procedures, or you will lose a portion of any amount of the debt that is recovered to fees.  However, if the lack of payment is affecting your ability to run your business because the amount of debt is so large, then you may want to speed up the process, as recovering even part of the debt as a result of collection efforts will be beneficial to you.  Your instincts, the debtor’s behavior, and the commercial debtor’s past payment history with you should influence the amount of time you wait before outsourcing to collections. 

Why A Collection Legal Network May Be More Effective Than Straight Collection Agencies In Collecting Your Debt

While a collection agency can be effective in recovering debt, in many cases, you will get much better results by using a collection legal network.  Collection agencies are limited to the services they can provide.  They can make phone calls daily and send letters in an attempt to recover debt, but that is the extent of their abilities.  If the debtor ignores the calls and letters and fails to make acceptable arrangements to pay the debt, the collection agency will have to hire an attorney if they want to pursue legal action to recover the debt.  This means that in the event that the debt is recovered, you will receive a lesser amount due to the legal fees that are on top of the fees paid to the collection agency for their services.

Calls and letters from a collection legal network, however, are typically more effective than those from a collection agency.  One reason for this is that debtors tend to take a call or letter from a collection legal network more seriously than those from a collection agency because they are more intimidating.  When faced with the legitimate threat of legal action, debtors tend to be more willing to make payment arrangements in a timely manner, saving you the added time and expense of litigation.

If the debtor is still unwilling or unable to settle the debt, a collection legal network can begin the litigation process on your behalf, sparing you the stress of having to deal with it yourself.  In addition, you will benefit during litigation from having the collection legal network involved throughout the entire collection process, as they can provide all of the necessary documentation to establish the previous collection attempts made.  This will make it easier to successfully make your case so that the court proceedings will go in your favor, and you will be able to recover the debt.  

What are some of the ways debt can be collected and what are some of the benefits of each?

Are Government And Municipality Collections The Area To Focus In As Debts Mount For Cities And Towns?

Image courtesy of  Pat Hawks

Due to the limited number of personnel and the enormous amount of work to be done in all facets of city and town business, it is often difficult for these entities to collect unpaid taxes, fines, and other debts owed by citizens.  However, every unpaid debt, regardless of the amount owed, affects the city or town’s operating budget to a degree.  With states cutting the budgets of local governments more and more each year, it is important that as many debts as possible are recovered. 

Government and municipality collections may be the area to focus in as debts continue to mount in cities and towns.  With a provider of collections to continue collection efforts on their behalf, local government agencies can focus on their daily business.  While some debtors may find it easy to disregard correspondence from their local government or municipality agency in regards to a debt, collections services can be much more effective.  One reason for this is the amount of time and effort that a collection service can put into collection attempts.  Town and city governments are limited in the amount of time they can put toward making phone calls and writing collection letters to recover debts, but this is not the case for a collection service specializing in such matters. 

With the focused collection attempts provided by a collection service, the debtor will not be able to ignore the collection attempts, which were likely more limited and sporadic when provided by local agencies.  When the debtors realize that the matter of their debt is not going to be dropped, they will be more likely to pay the debt.  The push from a government and municipality collection service may be just what is needed to get the debt settled.  Although it is not likely that every debt will be recovered, the percentage that are will be a boon for the city or town’s budget.  

How Are Holiday Sales Affecting Collections?

Image courtesy of cescassawin / FreeDigitalPhotos.net

For most businesses, good sales during the holiday season are vital, and a great season can be instrumental for a company to turn a profit for the year.  However, even if holiday sales are exceeding expectations, old debt must still be recovered.  If sales aren’t meeting goals, it is even more important that the process of collecting old debts continues.  Businesses carrying a large percentage of uncollected debt won’t be turning much of a profit for the year, regardless of great holiday sales.

That being said, it is typically harder to be successful with collection attempts during the holidays, as people tend to spend all of their expendable income in addition to running up more debt on credit cards.  Even customers who have been honest in their communications with you may be less likely to answer the phone or respond to written correspondence during the holiday season.  Those who do answer may be full of excuses for making late payments.  While your goal shouldn't be to ruin your debtors’ holidays, you shouldn't feel like Scrooge for trying to recover a debt that is owed to you. 

After the holidays, the number of accounts that are outsourced to collections tends to sky rocket.  Individuals who have spent more than they could afford to during the holidays often find themselves without enough money to pay their household bills and debts.  Overspending during the holidays can take months to recover from, which means you could be waiting a long time for your money if you don’t outsource to collections in an attempt to recover the debt.  An account that was already in arrears may be turned over at the beginning of the new year.  In addition, some customers may have accounts that were in good standing before the holidays, but they may fall behind after the new year.  Despite the holiday season, collection attempts must continue so that your business won’t suffer.  

What are some of the reasons government and municipalities end up with large amounts of debt?