Effective debt collection techniques are necessary for any business, regardless of the economic climate. Knowing how to get your customers to pay their past due debts on time will increase your cash flow. After all, running a business, you have your own debts to pay. Absent an adequate cash flow, you risk falling behind on your own obligations, which leads to problems with suppliers, and/or loss of easy credit terms with your bank or lender.

Mastering these debt collection techniques often spells the difference between barely staying afloat, or thriving in your business.

Listed are the top 3 debt collection techniques that will increase cash flow to your business:

1. Alter Your Payment Terms

Be sure to state clearly on all your invoices and any provided quotes what your payment terms are. Many businesses permit 30-60 days before payment is due. Perhaps you should consider reducing the payment terms to 14 days, or 21 days.

Amending your terms of payment can mean the possibility of receiving your money sooner rather than later. It can also mean that an unpaid account becomes delinquent within a month. You are within your rights to start collection activities before more precious time has passed.

2. Written Statement Reminders & Follow Up Calls

Once an account has become past due, you can issue a written reminder to the customer to gently encourage them to pay their bill to your business. You need to be very careful with the wording you use in your debt collection letter, as the laws surrounding debt collection techniques are quite specific. Sending a written correspondence means you have a record of your attempts to collect the outstanding debt in case of future issues arising.

You should also call the customer and remind them of their delinquent debt, and to establish an estimated time frame to effect payment. Again, be careful in your communications, choice of wording, as well as the timing of your call.

Debtors are afforded protections under the Fair Debt Collection Practices Act (FDCPA), so make sure to adhere to these guidelines, regardless of the method of contact you choose.

3. Outside Collection Agencies

Sometimes it doesn’t matter what you do, some of your debtors won’t pay their debts. Even if they are going through some financial difficulties themselves, this still doesn’t help your business if they’ve already received goods and/or services in good faith, and are no longer able to pay their bills.

When you’ve exhausted all other internal avenues of debt collection options, then its time to call a third party collection agency to pursue the past due balance for you.

Collection agencies are professionals in their field of expertise. This means theyre already well aware of the specific rules and regulations that surround the debt collection industry. They are able to act on your behalf to recover any delinquent payments owing to you and the debt collection techniques they use are specifically designed to bring cash flow into your business sooner rather than later.

David P. Montana has written, taught and served as a business consultant on the subject of collection agencies for thirty years. David would like to hear from you, and encourages you to write about and share your success stories, as well as challenges, issues and concerns with debt collection techniques.