Collecting Business Debt in Difficult Times

Your business may find itself in a tough financial situation when difficult times hit and some of your customers are unable to pay their debts on time. Know that you’re not alone in this, as many businesses are finding themselves in the same boat.

Typically, businesses tend to focus on daily operating procedures and coast without a problem, carried gently by the wind; all while overlooking important aspects of managing overall cash flow until difficult situations occur. We’ve discovered this detail is commonly overlooked because it is not necessarily prioritized until it is too late. Until that point, it had not been vital, so the problem hadn’t been on your radar. Now, once a storm has hit and the waters calm down, you find yourself carried out to sea and far from shore. You learn more about sailing during rough seas than you do in the calm sunny days. Difficult times frequently result in an influx of clients who are left unable to keep up with their debts and your business suffers the brunt of this. The question now is how to approach it in a manner that is respectful of your customer’s circumstances, while still effectively collecting your receivables.

Taking the appropriate steps is crucial to both the prevention and cure of business debt. As many businesses struggle, COVID-19 is a reminder that it is crucial to have proper collection procedures in place before it is too late, and the best time to begin is always the present. If your business is one that often grants credit to customers, then you are essentially acting as ‘the bank’ and thus there is always risk for liability. You may not know your customers are struggling and unable to pay until it is too late. This unforeseen economic recession compounds the difficulties, so it is crucial to set up your business in a manner that efficiently tracks and manages receivables and your cash flow, so that your business can stay afloat despite difficult times. There are simple, yet overlooked, steps that ensure survivability and the best time to implement them is always now. It’s never too late!

At Tavelli Co., Inc., we have been in this business for 37 years and seen all the reasons why millions of dollars in business debt has gone bad. We not only help collect debt, but we also help our clients improve their systems by reporting these reasons back to our clients, while providing consulting and training to ensure that our business clients can improve their collection process. We have a webinar coming up on Tuesday, July 14th, 2020 called “Collecting Business Debt in Difficult Times” where our founder and CEO, Robert Tavelli, will go into greater detail about how your business can collect business-to-business debt in difficult times. This article overviews some of the key points of the collection process we recommend to our clients that entails what we will be discussing in detail in our upcoming webinar.

The right collection process is a three-step process. These three phases are credit granting, credit management, and credit enforcement. If each is allocated the proper time and resources, then they work together towards greater success.

Credit Granting

Credit granting is always the first phase in the collection process, and it is the most important to get right. As the saying goes, ‘prevention is 90% of the cure.’ This is why credit granting is the crux of the whole operation. The more time spent preparing, the less time you will spend fixing; it only helps make enforcement easier down the road. So what are the key components to look for when granting credit. Our webinar will discuss these topics in further detail, however, first and foremost, knowing your individual customer is key. You possess the jurisdiction to grant credit to those who you believe are capable of paying you back and this means denying those that do not meet the standards as well. Only grant credit to the right company and individuals. If you grant credit to the wrong entity, your debt immediately becomes unenforceable.

In addition, quality information is king. Go into detail upfront, so that you are not left on a wild goose chase of trying to catch up down the road. A standard credit application and detailed forms ensure that the process is structured and systemized; we will be going into detail in our webinar on the exact information to gather for your credit application. Finally, it is crucial to ensure the terms and conditions properly support sales and the health of your business. If you are put in a position that requires you to enforce your debt, then you want to be sure that your terms and conditions allow you to do so properly. This works to ensure that all bases are covered when you grant credit.

Credit Management

Secondly, credit management must never be overlooked. The key to a smooth credit management process is to know how each account is likely to develop and proactively doing something about it at the first signs that an account might be falling behind. Time is your enemy when it comes to getting paid in full; the longer the account sits the less likely collecting on it becomes. In our webinar, we will teach the key components of a good credit management process so that you know what to look for. It is crucial to have the right follow-up methods in place.

Our agency utilizes our staple collection method called the ABC’s of collection. It focuses on how to grade accounts, in order to prioritize high probability accounts and follow-up at the appropriate times. Additionally, we seek to educate on how to maintain detailed and documented information. A paper trail is crucial for maintaining up-to-date information each time you contact your customers. The moment this information management falls apart, you can expect your enforcement of debt collection to fail because skip-tracing to find where to contact your customer adds an extra step to the process. Finally, as with all things in life, communication is key. Knowing how to talk to customers that owe money is essential. It is a task that can sometimes get emotional and uncomfortable, so we desire to teach ways to improve the situation and remove any tension from the conversation. You will learn how to handle objections that arise during the debt collection process and get difficult conversations back on track. There are a multitude of tips that can simplify these conversations and keep the dialogue respectful and helpful for all involved.

Credit Enforcement

The last step is credit enforcement. It is vital to know when to let go of your bad debt and let your collection agency or attorney enforce the work that you have done up front. You should always ensure that you are focusing your time on the 97% of accounts that do pay, rather than spending futile time on the 3% of accounts that do not pay on time. Knowing when to let go of these accounts can save you extra hassle and costs because, after all, time is money. As your receivables age they inherently become less collectable. For example, if your debt is more than six months past due, you will likely only collect fifty cents on the dollar. This is why dealing with your debt in a manageable and timely manner is essential. If you have granted credit correctly and managed your credit properly then you should be in a great position to enforce it.

What are the components of maintaining good credit enforcement? In our webinar we will teach you how to ensure that you do not alienate customers when using a collection agency, particularly like ours, which uses a process driven customer service approach. We will also teach how to provide our collection agency with complete information, so we can enforce your debt properly to ensure your accounts are as collectable as possible.

Conclusion

Sign up for the webinar to learn more using the link provided here: “Collecting Business Debt in Difficult Times.” We will go into greater detail about the topics above and answer any specific questions you may have about how to collect business debt in these difficult times. We recommend that you come with specific questions that you wish to know more about, so Robert can readily provide the answers you are looking for. If you are not already a partner with our business collection agency, you can set your business up for success by not only collecting your business debt, but also by receiving valuable feedback from us regarding your accounts to help improve your overall collection process.
Webinar: Collecting Business Debt in Difficult Times

Date: Tuesday, July 14th, 2020
Time: 10-11:30am PST
Sign up: Link here
Cost: $79

Current clients complimentary! Refer a friend/colleague and they receive half off. Email us at info@tavellico.com for promo codes to use at checkout to receive these offers.

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Tavelli Co., Inc. has over 40 years of unparalleled experience in the debt collection and receivables management industry. Our mission is to achieve the right balance between getting clients paid and being empathetic to debtor circumstances, through implementing innovative practices, hiring experienced people, and improving business decisions through analytics. We provide peace of mind to all involved by collecting money with no complaints. Tavelli Co., Inc. takes the time to carefully listen to your customers and share their feedback with you through meaningful data and transparent communication, so you have access to the information you need to make quality decisions and improve your processes in the future. Contact us today and let the debt collection experts at Tavelli Co., Inc. help you set your business up for success.

IMPORTANT: Information provided by Tavelli Co., Inc., any employees of Tavelli Co., Inc., or its subsidiaries is not intended as legal advice and may not be used as legal advice. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.