A bad debt expense is just one of the effects of a slow debt collection process that imparts negatively on the bottom line. Moreover, resources associated with customer outreach have a similar adverse impact on costs.
Responding to Debt Collection Rather than Predicting It
Although you should expect every customer to pay their credit timely, placing too much faith in them until their accounts are way overdue leaves you in an awkward position. And this nudges you to react to the situation because you failed to take proactive steps to curb the concern.
Subsequently, with debt continuing to mount, your enterprise may have no option but to avail incentives that assist in the debt recovery initiative.
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Solution:
Align your debt collection mechanism by gathering more customer data. Assemble such information through full credit reports alongside evaluating early-stage delinquencies.
These policy efforts make it possible to identify high-risk debtors upfront. Besides, ascertaining the integrity of credit data.
Failing to Communicate With Customers
Today’s technological advancements make it relatively easier to reach out to clients in more varied and unique ways. But what should you do if you have a multipurpose approach to customer interaction?
More so, when some clients may be inclined to pay their debts but may not feel at ease communicating with your firm to follow through?
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Solution:
Invest in linked messaging platforms that integrate seamlessly across multiple communication channels. This strategy not only increases your capacity to contact the clients but also helps them commit to paying outstanding debts.
Also, you’re in a relatively better position to clamp on the time billed as a result of repeated calls that usually go unanswered—while at the same time improving on customer experience.
Directing Customers to a Payment System that Entails Multiple Touch Points
Usually, paying an outstanding debt is an uncomfortable exercise for a significant proportion of customers. And when coupled with a complex multi-touch payment system, the entire process may become an obstacle to payment of account balances.
What’s more, expecting customers to manually feed their payment information and waiting for financial service providers to clear the transactions further delays the debt collection agency processes. As a result, these setbacks cost you money amid more delays in debt payment. Also, the longer it takes a customer to get to the payment stage, the higher the risk of non-payment.
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Solution:
Integrate payment collection platforms into your debt recovery service to streamline payment processes. Besides, it facilitates the ease of entering payment data.
other valuable tips:
Writing Off Bad Debts in Expectation of Favorable Tax Treatment
Although waiting for a favorable tax treatment to cut your loss may be appealing (especially when a debt is seemingly uncollectable), such actions face significant complications.
Indeed, such an expense arising as a result of either a slow or inadequate debt-collection process demands that you generate significant cash flows to offset it.
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Solution:
Resist the urge to hastily cut your losses by actively exploring the options available that can help you recover a delinquent debt. Furthermore, build up your debt collection initiatives to allow you explore all available communication channels, payment platforms, and settlement options before embracing a bad debt loss.
Image Credit: debt recovery process by Pixabay
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