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Proper Debt Collection/Management Principles

Simple Alliance, Kenya Limited

Ensuring Prompt and Certain Debt Clearance

Debts Disrupt Business Operations

Owing debts disrupt your cash flow projections. To ensure stable cash flow, you need to keenly follow up on debtors to ensure that they pay up on time. Debt recovery has to be one of your important tasks.

Debt Collection

Effective debt collection is indeed a skill that derives from your communication skills. Through tactful dialogue with your debtors, you can successfully give reasonable allowances for pressed debtors to settle their obligations. In the process, you create loyalty among the genuinely hard-pressed debtors. Who knows, as a show of appreciation, the debtors could remain your long-time loyal clients. This is a marketing competence that you would do well to nurture. 

Constrained Debtor Categories

Depending on their motives and circumstances, you defaulting debtors fall into three key groups, namely:

  • The genuinely constrained ones who seek extension of repayment period 
  • Habitual defaulters who use every excuse to evade payment
  • Those who are forced by legitimate fiscal limitations to postpone payment 

Your Reaction

In an ideal situation, you would like your debtors to settle their accounts as early as possible. You would use the resultant cash to run various business operations. This is however not always the case. You are sometimes compelled by circumstances to give concessions.    

Handling Genuinely Struggling Defaulters      

With suitable communication and cooperation, you can arrive at a compromise arrangement whereby the debtors pay up gradually. The instalment payments would help to minimise any existing cash shortages.   

Managing Typical, Chronic Defaulters

After establishing that a certain debtor is a routine defaulter, you need to quickly institute measures to handle the situation. One option is enlisting the help of a debt collection agent so as to recover your cash. The collection agency is usually the last resort.     

Debt Collection Tips

Making defaulting debtors to pay up could be a demanding undertaking. Your commitment and firm stance are two elements that could go a long way in settling the matter. Some principles you could go by include:    

  • Firmly demanding for repayment
  • Accepting electronic payment methods
  • Not annoying debtors
  • Seeking creative repayment options
  • Composing demand letters

Avoid Pestering Debtors

Resorting to harassment is unlikely to give you the desired results. In addition, it could go against debt collection rules. To avoid harassment, ensure that you do not contact a debtor at an uncomfortable time or an unsuitable venue. Figure out the appropriate time and place where you can reach the debtor.

Craft Targeted Demand Letters

Create and submit demand letters or debt collection letters to debtors. Let every succeeding letter be more serious than the previous one. A debt collection agent can help you to write the demand letters.    

Seek Resourceful Alternatives

Afford genuinely constrained debtors the leeway to settle their accounts as per their current abilities. Solemnify the debtor’s payment pledge with a written agreement.      

Accept Credit Card Payment

Credit cards not only assure payment, they also minimise debtors’ risk of defaulting. Besides, credit cards considerably shorten the payment time. If you don’t already accept credit cards, make a point of introducing them as a debt management strategy.    

Having your debtors pay up their debts fast is a goal you would always pursue. This is because owing debts deny your business of crucial operating capital. You cash flow is disrupted by overdue debts. You thus need to always strive to analyse and manage your debtors to avoid nasty default scenarios. For debtors who are genuinely hard-pressed for cash, arrange for a suitable payment formula. Debtors who are notorious defaulters call for your urgent and firm action. Aside from writing debt collection letters or demand letters, you could hire a debt collection agent to hasten the payment. You could also firmly focus on the payment and stick to it. Take note that harassing debtors is not advisable as it rarely yields positive outcomes. Pestering debtors could contravene debt collection rules. Electronic payment methods could save you the trouble of running after defaulters. Moreover, credit cards shorten payment periods and guarantee payment.

Copyright (C) 2016, Simple Alliance Kenya Limited

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