A credit collection agency or a collection department within a company has a standard mission -- collect as much money on each account as possible. At some point in the collections process, companies decide that they have invested enough resources in collecting on an account. Then they either sell the account or move it to a low-priority grouping of accounts.
Break-Even Point
Many businesses extend credit to their customers. A firm will issue tighter credit restrictions if it is credit-oriented. A firm will want to at least recover its own cost for a product the customer purchased. If this cost is recovered but the rest of the total price of the item is not collected, the firm has reduced its risk by hitting the break-even point. If no money is collected after the break-even point, the company is just cutting into its profits.
Scheduled Collection Methods
A business uses standardized collection methods to bring in regular revenues from collections and to treat all customers fairly. One example is automating the computerized billing system to generate bills that will be mailed to delinquent customers on a schedule. A firm might issue letters at 10 days, 30 days, 60 days and 90 days past due. At some point in this first few months, a firm might also call a customer to find out when the account will be brought current.
Explaining Credit Terms
Lay out the terms of any sale based on an issuance of credit and what penalties will apply if a borrower, whether a business or consumer, becomes delinquent in payments. Borrowers will consider their present financial circumstances and determine if they can risk paying late. If you are clear in the beginning, you can reference penalties during the collections process. If you make the credit penalties in such small type that customers who don't read the fine print miss them, you'll have a harder time explaining them when customers fall late on their payments.
Describing Consequences
Another concept in credit collection involves giving a customer a good reason to pay. Do this by explaining in the collection letter or the phone call what the next action will be if your firm does not receive a payment. Customers wanting to avoid these consequences might respond by contacting you and making payment arrangements and paying what they can so that you will hold their account from being reported to credit reporting agencies.
0 comments:
Post a Comment