What to do when a debt become overdue?

 

Lending money or providing goods on credit is part of a business. The working relationship between two businesses or two individuals requires trust. But a lot of the time, this trust is broken when the other business doesn’t pay the outstanding amount on time.

In recent years, the number of businesses that had to write a part of their debt off has only increased. That is why it is becoming necessary for businesses to start employing debt recovery strategies like in-depth research of the business you are lending to or so on.

But even after taking precautions, you can end up with a debt that has gone beyond 90 days. What to do then? Well, here are your choices.

1.  Start an internal debt collection process

A business can start an internal collection process. The positive thing about this is that you are giving the debtor a chance to ignore legal chaos. Also, since you know them and have a working relationship with them, you can work with them better.

The downfall of doing internal collection can be many. For instance:

• You end up consuming a lot of resources and time of the employees

• Keeping the debit account to yourself is risky as it decreases the chances of recovering the debt for a collector.

• If you don’t have a dedicated department for collection, you are wasting resources of all employees

2.  Outsourcing to a commercial debt collection agency

If even after exhausting all your resources, there is no positive outcome, it is time to outsource the debt. A business can hire an international collection agency if they don’t know the

• Whereabout of the customer, or

• If they are not responding to payment reminders

• Are unaware of the laws of the state or country where the debtor is.

In recent years, there has been a rise in hiring a commercial debt collection agency by businesses. They know the importance of outsourcing to experts in this field. A debt collection agency is:

• Experienced and they have collectors who are experts in specific debt types

• They are aware of all the laws that protect the debtor and ensure that they or the company doesn’t break one.

The problem with hiring a commercial debt collector for a business is finding the correct firm. It is because hiring a collector is like finding a partner who can help them navigate challenging financial scenes. So, when you are looking for a debt collection firm, make sure:

• They have experience

• They have license and certification

• To check-in with their previous customers for feedback

• That they have a decent price model. Most collection firms work on a commission basis. So, go with the one with a high success rate and a workable price model.

3.  Legal routes

The last option takes you straight towards the gates of a court-house. For a business, who doesn’t want to work with a collection agency, the last option is to hire an attorney and sue the debtor.

But keep in mind that:

• It is expensive to hire a debtor

• It can turn your relationship with the debtor sour.

So, when you are faced with an over-due debt, what option would you go for? Hiring a collection agency is most recommended. As they help you recover the money while maintaining the relationship with the client as well.