5 Reasons Why Your Business Should Focus on Delinquent Accounts
Delinquent accounts are probably one of the least favorite things that you have on your to-do list. You know that they’re important to resolve, but you can also probably find a million other things to do. You probably think that the other million things on your to-do list will probably be more profitable and less frustrating. Here are 5 reasons why your business should focus on delinquent accounts.
1 – Delinquent Accounts Affect Your Bottom Line
The first, and main, reason why you should make resolving delinquent accounts a priority is because they affect your bottom line. Writing them off isn’t necessarily your best course of action. Isn’t collecting even part of the money better than collecting none of the money?
Since delinquent accounts are part of your accounts receivable, that makes them part of your capital. To improve your capital, you must work to collect on your accounts. If you’ve ever applied for a business loan, you know that your capital is important.
2 – You Don’t Want to Run Out of Time
No, really. You don’t have forever to try and collect on delinquent accounts. Every state has laws that determine how long you have to collect on a debt. After that time, the debts are time barred and you cannot legally collect on those debts.
3 – Older Debts Are Harder to Collect
You purge your records. You clean out your files. Maybe you decided to sell off some of your debts or bring on a professional debt collection agency to help you collect on older debts. Older debts are harder to collect. It can be harder to produce documentation to support the debt. It can be even harder if you don’t have documentation to provide to the debt collection company and they assign an internal account number. It’s not just about debts that are time barred. It then becomes an issue of you being able to prove that the debt is legitimate.
The longer you wait, the more expensive it gets to try and collect on a delinquent account. Skip tracing costs money. If the information you have is no longer valid, you’ll have to pay a company or a person to find current contact information.
4 – Work on Your Risk Classification
As you examine your delinquent accounts, you get the opportunity to work on how you classify risks. This is the perfect opportunity to review your credit processes. Do the businesses or consumers have things in common? Are there credit applications in their file? It’s important that you review each file to determine if you or your staff was able to properly assign a risk classification. Make sure that you make any necessary changes to your credit policy. Credit limit questions? Book your free consultation. Let us help you set the right credit limits to protect your business!
5 – Opportunity to Set-up a Collection Plan
The sooner you begin to work on your delinquent accounts, the sooner you are able to set-up and work a collection plan. A collection plan is a specific set of actions that you or your team follow to work on delinquent accounts. For instance, if you have an account that is up to 30 days past due, you send some form of written communication about a week after the due date when the payment was not received. At 35 or 40 days, you start phone collections on large accounts and for smaller accounts you send another follow-up letter.
Have a collection plan in place eliminates any guess work on your end about how you need to handle an account. It should start at zero to 30 days and run all the way through 90 days. If you go 90 days without payment, you should consider outsourcing to a collections agency.
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