Have you tried handling commercial collections alone? If so, you could be making serious mistakes that lead to accounts receivable errors. Keep reading to learn about the most common collections mistakes and how to reduce your accounts receivable errors.
Commercial Debt Recovery Is Tricky
Commercial debt recovery is a nuanced process. Poorly executed collection practices could damage your business’s reputation, affect client relationships, and minimize the probability that you can successfully collect your debts. Whether you’ve been handling commercial collections alone for years or are unsure how commercial debt collection works, learning the most common mistakes can help you avoid them.
The 5 Most Common Collection Mistakes
1. Harassing the Customer
Too many businesses think that they have to get tough on customers to get their money back. Life isn’t a Scorsese movie—threatening clients that owe you money will only paint your organization as aggressive, rude, and potentially dangerous. Contrary to what many think, collections are about effective, two-way communication. Build bridges with the customer and find solutions together.
We’ve even seen companies spam their clients’ communication channels. While getting in touch is good, bombarding your clients’ inboxes or phones builds resentment and will jeopardize your recovery rates.
2. Being Too Soft on the Customer
On the flip side, real life isn’t Sesame Street, either. Ultimately, your business needs its AR to survive, and you must make that clear to outstanding debtors. While collections are collaborative, you shouldn’t just yield to every customer demand. We’ve seen too many cases where business owners act like debtors’ personal doormats and waste time and energy without ever recovering their debt. Want to fix accounts receivable errors? Remember that you’re working with debtors, not for them.
Don’t Know How to Communicate With Debtors?
Managing tone when collecting outstanding debts is challenging. If you don’t know how to handle it yourself, research commercial debt collection services.
3. Not Documenting Everything
While nobody looks forward to it, some collection cases will end up in court. Prepare for a potential court battle and start building your case by documenting everything you do. Make sure that you follow all debt collection laws, and you can be confident going into court.
Outside of preparing for legal proceedings, documentation is great for conducting an internal review. Use this documentation to reflect on your customer policy and look for any common points of failure. Ask questions like:
- Am I being too aggressive or soft?
- Is there a specific type of customer that fails to make payments?
- Are my credit policies too harsh?
- What are my communication strengths and weaknesses?
- What can I do to improve?
4. Refusing to Negotiate
As mentioned above, collections are a collaborative process. Many business owners stubbornly cling to their initial demands, expecting a full payment with interest and additional fees. While it would be ideal if every customer could meet payment terms on time and in full, that won’t be the case.
Clients rarely fail to pay their bills from sheer negligence. If they’re failing to pay you, they’re probably struggling with cash flow issues themselves. Try to see the issue from your debtor’s perspective by using an empathetic approach. This perspective will help you find an agreement that works for both of you and fix accounts receivable errors. 80% of an interest-free payment is preferable to a prolonged battle in court where you recover nothing.
5. Hiring the Wrong Collection Agency
One of the most serious mistakes business owners make is hiring the wrong commercial collection agency. The wrong collection agency will make the above mistakes and refuse to help you out in court when it comes down to it. This leads to situations where you hire an agency with questionable collection practices and are left alone to defend them in court.
The right collection agency is a partner from start to finish—regardless of if your case gets settled fast or needs to go to court. The right collection agency will never jeopardize your business’s reputation because they’ll use ethical practices that follow the necessary laws. Looking for the right debt collection agency? Look no further than Rapid Collections. We’ve been helping companies get their AR back on track since 2003 and can do the same for you. DIY collection services are a recipe for disaster—leave it to the pros and contact us today.