Best Way To Collect On Old Debts

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When receivables reach the 60 day mark, it’s time to make some quick decisions so they can get collected on quickly and with little expense.  If you outsource the collection you will of course pay a fee, but if you attempt to get it done yourself and it takes too long you can wind up having a credit rating drop substantially.  

If you have a close hand on the debts owed to you then it may be an option to try and figure out what type of people you are trying to collect from.  There are many times that you might just be dealing with someone that is slow to pay and there are other times you could be trying to get blood from a stone.  These differences can help you make the decision on what to do about the debt.  The slow to pay person may benefit from more serious urging in the form of a letter and phone calls, while the person without any money or no response probably needs  to be outsourced. 

There are a few tips that can help make it easier and insure that you get more money.  Some of them are as follows:

• Keep a stack of form letters and notes that you can easily fill in the blanks and send out. 
• Always charge a percentage for late payments and for attempts at collecting. 
• Consider converting into promissory notes. 

Why consider turning debts into promissory notes?

When you take the time to convert an old or bad debt into a promissory note you are technically changing it into a current obligation from something that was nearly forgotten.  Banks will look at this much differently than a debt they see you haven’t been able to collect on. 

Transferring several invoices for bad debts into one cohesive promissory note is a clean way to eliminate confusion about what is owed to whom.  You can also stipulate in the promissory note the coverage of different fees such as collection or attorney fees.  You will need to get the client to sign the note which will also let you know their intentions.  If they don’t sign it’s a good time to turn them over to a collections law firm or agency.