Collecting unpaid invoices and recovering outstanding debt can be a hard process, and often feels futile and frustrating.

Here, the debt collection and recovery experts at the Monetaria Group discuss 7 things many businesses do wrong when trying to collect debt on their own, and what they can try instead to maximize their chances at a successful recovery,

7 Mistakes Your Business May Be Making When Collecting Debt

1. Clarity in Debt Communication

Many times, business owners communicate with debtors in a scattershot and unorganized fashion, and are not clear about the amount owed, what was it for, and when the parties discussed the outstanding payment. Ensure your team communicates the debt details effectively, covering the owed amount, charges, due dates, and any additional fees, as well as all supporting documentation. Clear communication establishes a foundation for mutual understanding between your business and the debtor.

2. Aggressive Collection Tactics:

When a client withholds payment, it can slow down your own cash flow and challenge your business, which can make it feel like a business owner’s only option is to pursue aggressive collection tactics. Deploying aggressive tactics in debt collection can backfire, and reduce the possibility of finding a mutually beneficial outcome. This includes refraining from the use of abusive language, threats, or any form of harassment. A more respectful approach enhances the likelihood of successful debt recovery.

3. Non-Compliance with Collection Laws:

When someone owes you money, you have the legal and moral high ground. Ensure you maximize your chances of a successful debt collection by familiaring your business with collection laws, especially the Fair Debt Collection Practices Act (FDCPA), and following them to the letter so you don’t have any issues down the road. Understanding the legal framework governing debt collections aids your business in adhering to communication guidelines and avoiding legal disputes. State and local regulations also need consideration. Even if you are collecting commercial debt and the FDCPA rules and regulations do not apply to you, it is always best practice to track the FDCPA no matter what.

4. Lack of Documentation Precision:

Shoddy and inadequate agreements, contracts, or invoicing complicates debt collection and recovery when a customer defaults or just refuses to pay. Ensure your organization maintains proper records, documenting the debt, payments, non-payments and communications. This meticulous approach streamlines the collection process and proves your case. It may seem like an additional administrative task that is unnecessary, but it always pays off in the long run.

5. Upholding Integrity in Debt Amounts:

Maintaining integrity in debt collection is crucial, and providing false information or misrepresenting the debt to the consumer is exceptionally problematic. Stick to the documented amount owed, and work to foster trust and credibility throughout the collection process.

6. Too Much Contact With the Consumer:

In their zeal to collect what is owed to them, business owners might find themselves obsessively calling or emailing the debtor at all hours. This is straying into the murky areas of harassment, which is detrimental to your case and counterproductive. Adhere strictly to legal guidelines, refraining from contacting a consumer’s friends, family, or employer without the consumer’s permission. This privacy protection measure is not only advised but also legally mandated in many cases..

7. Not Listening or Being Inflexible

Sometimes, a client may have a valid reason for not paying.

If there was a problem with the service or product, business owners would go a long way towards collecting their debt by hearing the client out and working together to achieve a mutually beneficial outcome that ensures you get paid. Simply ignoring their concerns won’t make it go away, and you’ll still be waiting on your money while they wait to reach a solution.

Viewing disputes as opportunities to rectify issues fosters goodwill and helps retain customers.

When a customer cannot pay because of financial difficulties, attempting to collect money they don’t have isn’t productive. Acknowledge that consumers may face financial challenges, and being open to flexible solutions, such as offering payment plans or settling for a lower amount, demonstrates understanding, and in most cases gets you a better result.. This approach prevents potential customer loss during difficult financial periods and encourages cooperation in debt recovery.

How to Avoid These Mistakes When Collecting Debt?

The most effective strategy to sidestep these pitfalls is to enlist the expertise of a professional debt collection agency or debt recovery attorney —or opting for a combined approach, which Monetaria offers. Their nuanced understanding of collections frameworks, adept communication skills, and strategic approach can transform the debt recovery process and make it considerably easier for you to focus on growing your business while the professionals worry about collecting delinquent payments. By entrusting your collections to these professionals, you not only mitigate risks associated with legal complications but also enhance the likelihood of a successful and amicable resolution with debtors. Embracing their specialized assistance ensures a smoother path towards debt recovery and allows your business to focus on its core operations with confidence and peace of mind.

We’re happy you found this article informative! Go back to our blog page to find more tips, tricks and guidance on collections, to ensure your business gets paid.

If you have unpaid debts that need to be recovered, commercial debt collection may be a good option for your business. A commercial debt collection agency can help you with the process of recovering past-due accounts and provide guidance on best practices for managing accounts receivable.

Led by a team of experienced commercial debt collection attorneys, Monetaria Group has lawyers for debt collection and helped hundreds of businesses recover and collect their outstanding debts and payments. Schedule a FREE consultation with our expert team to see how we can help you recover your money today!