Even More Reasons to Work with a Responsible Collection Firm

Image via pegasusnews.com

There are plenty of reasons why choosing to work with a responsible collection firm is a wise decision. Not only are responsible collection tactics less distasteful than the “thug tactics” employed by many collection agencies, but relatively respectful collection tactics are more likely to produce favorable outcomes with your debtors as well. There’s a third, even more important and even more practical reason to choose a collection agency that does NOT utilize inappropriate tactics- there are laws against the most common debt collection harassment tactics.

At a very base level a collection professional needs to be polite and respectful to the debtors they speak with. Collection agents aren’t allowed to bully or otherwise act in an excessively rude manner to the debtors on their lists. While a collection professional isn’t likely to be reported if they speak in a manner a debtor considers “rude” or “disrespectful,”such a manner will hurt your case if your debtor’s account goes to court.

One of the most common forms of harassing behavior utilized by debt collectors is a continuous string of phone calls at inappropriate times. Now, there’s nothing wrong, illegal or immoral about calling a debtor about the money they owe. But legally speaking a collection agent can only make these calls during a range of hours that have been clearly defined according to state and federal law. The laws dictating when a collection agency can call a debtor differ from state to state, and if an agent repeatedly makes calls during prohibited hours they can be sued for harassment.

Harassing behavior does more than simply lower the chances you will collect from your debtors- it gives your debtors legal ammunition to use against you. 

Taking Responsibility as a Collection Agency

Collection agencies don’t always have the best reputations, and often with good reason. Many collection agencies utilize a whole suite of underhanded and downright immoral tactics in their quest to receive payment on their accounts. While tenacity is certainly a good thing in the world of debt collection, there’s no need to resort to unsavory tactics in order to close a case. Any collection agency that resorts to harassing, bullying, and applying negative pressure to their debtors is simply proving their lack of expertise in this admittedly challenging field.

Most lenders would prefer to collect from their debtors without their collection representative resorting to these sorts of tactics for a couple reasons. The first of these reasons is moral in nature- most lenders don’t want to be associated with a collection agency that uses tactics they consider underhanded, manipulative or actively insulting.

Yet there is a very good reason why a collection firm shouldn’t resort to acting in such a negative manner- thug tactics rarely work. The more a collection agency attempts to “squeeze” or threaten their debtors, the more that debtor will take increasingly drastic measures to avoid their financial responsibilities. A hefty loan is distressing enough on its own for debtors. Once you add on the constant threats and acts of harassment utilized by some debt collectors you create a negative situation of truly overwhelming proportions.

Considering the fact bullying collection tactics are both distasteful and ineffective, it’s surprising so many collection agencies continue to utilize them. The reason why most agencies stubbornly persist with these tactics is simple- they don’t know any other method to try out. Most collection agencies simply don’t have the training, the experience, or the imagination necessary to figure out a more effective, and less distressing, mode of closing their cases. 

The Proven Formula for Locating Debtors

Image via Findany1anywhere.com

Lenders are constantly faced with the unfortunate reality that plenty of their debtors will attempt to go off the grid to avoid the responsibility of paying back their loan. While many lenders have procedures in place for collecting from debtors who are easy to find and contact, most lenders find themselves powerless to track down and elicit payments from debtors who have skipped town. Yet just because a case is difficult for a lending agency doesn’t mean it’s impossible for a professional collections agency.

Debt collection agencies and debt buyers develop proven formulas for finding skipped debtors. This process is referred to as “skip tracing” and it employs many of the same methodologies as private investigators and other professionals use to locate any missing person.

One of the most important skip tracing actions involves contacting and putting an acceptable amount of pressure on the debtor’s contacts. Speaking with all listed employers, all institutions and organizations the debtor is associated with, and contacting any references the debtor listed on their loan application often bears fruit. Even if these connections fail to offer assistance they will often offer up the name and contact information of other leads who may provide access to the missing debtor. The key to receiving useful information from a debtor’s connections and their leads lies in communicating with them in the right manner. E-mail and phone calls are easy to dismiss and to ignore, but in person meetings and attempts at making contact are more likely to result in open and honest communication.

The skip tracing formula will vary from debtor to debtor, but ultimately there are a few key principles which never vary.

Why collections is an important part of your business

Managing credit and collecting money are the 2 most important and vital factors which decide the fate of any business.  If you own a business that renders services or sells a product on credit, there is a big chance that at some point you will have a delinquent customer. Account receivables should be considered an asset to your business not a liability that is holding your business back. No matter what your business is or what its size is, at some point or another debt collection will become an issue for you.  Customers who delay payments have become a common scenario these days.   Bad debt or unpaid dues is an unavoidable problem for all organizations which further lead to restricted cash flows hampering the growth of the business.

Right now, with cash tight and business slowing down, companies need to go after the bad debts as a way to raise needed cash.  They need to go after the receivables even it if means getting just something now!

Significant economic change creates opportunities for those who have it in them to deal with it. During economic downturns and worldwide recession the importance of debt collection has come to the fore as a result of the lack of liquidity in the marketplace.  It has been magnified since 2008 with the collapse of many worldwide financial institutions. Consequently, banks have either withdrawn or reduced credit facilities to business and the impact has made firms being unable to discharge their debts in a timely fashion due to the diminished circular flow of funds.  Successful cash flow management should therefore be your main priority. 

 

BAD DEBT is the one major cause for bankruptcy. In a fast changing economy, selling on credit has a number of advantages, especially when it generates a larger volume of business as well as widens one's market share. In fact, selling on credit often 'Makes' or 'Breaks' a sale and at most times gives one that edge over competition. Yet, one cannot afford to take this area of credit control lightly, as too many companies everyday are mounting with debts that are increasingly doubtful of recovery.

The volatile business conditions of recent years have created problems of cash flow and interest charges never before encountered.

Companies large and small have, in many cases for the first time, come to realize that the trade debtors or receivables, on the balance sheet represent a very substantial and expensive consumer of capital employed. They are also now beginning to accept that, in total, trade debtors represent an investment in the market -place on which the expected return is the profit to be earned only when payment has completed the sale. At the same time, like all investments, those trade debtors are subject to the risks arising from the effect of the economic climate on that market-place generally.

A company can have the best product, an excellent sales record and the most dedicated workforce, but if it does not get paid, it will die.  An unpaid debt is a loan being financed by your company - it means that many companies are prevented from achieving their full potential, because instead of using borrowed money to develop and grow their business, they borrow money just to fund their own sales ledgers.

  

REMEMBER: Cash is to business, as blood is to the body -- allow it to drain away and the body becomes weak and eventually dies.