One of the struggles of being a financing firm or institution is to recover debts from borrowers or debtors. Although bonded by a contract, some people tend to run away from their obligation to pay for several reasons–usually because of financial constraints.
But how can your company solve these overdue accounts? How will you be able to prevent losses because of these accounts? The following are some ways that could aid your debt recovery:
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Know what is the problem of your borrower
Borrowers or debtors often miss payments because of several key reasons, more often, they cannot pay the amount they agreed to due to poor cash flow or other unforeseen cash issues.
If you know the problems of your debtors, you may be able to find ways for them to pay – which will be discussed in the fourth item of this article.
Acknowledging the struggles of your borrower could also lead them to cooperate more easily. Some borrowers have a hard time cooperating because they are feeling harassed into paying their debts. It is hard enough to live with debt on your mind, let alone to feel harassed because of it. If they feel like your company empathizes with their situation, it is more likely they want to solve it immediately–out of respect and out of being grateful.
If you are also aware of these problems, you could prevent some of them from happening in the future. You may also be able to develop new and surefire strategies in handling these kinds of problems.
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Evaluate your existing accounts, especially those that are overdue
Similar to the first strategy, evaluating your existing accounts and separating the problematic accounts can help you be more efficient, especially when it comes to manpower. By focusing only on overdue accounts, you will be able to balance out the workload of your agents or debt collectors.
After the evaluation, you can also assign more diligent accounts to lesser people because these accounts would not really take up more time. This allows you to transfer the overdue accounts to more agents or debt collectors. There is a higher possibility that you get to have a successful turnover by evaluating and segregating the accounts depending on their status.
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Add collaterals to the equation
Apart from binding contracts, some financing firms or institutions consider adding collaterals. Collaterals are assets that debtees or lenders accept as security for loans. The moment debtors or borrowers fail to comply with the payment option they signed to, your company would be able to get or acquire the listed collaterals to make up for the loss.
The greater the deal of the collateral, the more compliant the debtor or borrower could be. It would be hard for them to risk something valuable just to lose them because of the debt they owe. So if you consider getting collateral from your borrowers, make sure it is valuable to them. This would also assure their cooperation when it comes to payment.
In the event that these borrowers do not comply with the payment terms, then you can at least resell the collateral to prevent losses on your end.
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Allow them to have a more flexible payment option
This often goes along with the first strategy–knowing and sympathizing with the borrower. If you are able to identify their struggles, you would be able to create a flexible payment term bespoke to their capacity to pay. Though it may result in a slower turnover, you could at least prevent losses. No matter how small the payment could be and how long the terms indicate, you still be able to maintain cash flow–which is great in every type of business there is.
You can choose which borrowers you should offer these flexible terms to by applying the second strategy. Offering flexibility to every account is not always a wise move, hence it should only be practised and extended to problematic accounts. After all, your business comes first. How would you be able to offer your services to more people if you do not really get enough cash flow? Indeed, the returns might be slow in this case but it is a way more practical plan to get paid and avoid losses.
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Consider getting professional help
Sometimes, companies run out of strategies to solve their problems. It is not a bad option for them to consider outside help. This just means you are being practical and choosing your own battles as a company.
If solving business problems hinders you and your company from moving forward or expanding, then it becomes a problem itself.
Some financing firms or institutions have more overdue accounts than they can handle. It is a more reasonable action to hire a debt collection agency such as JMA Credit Control.
These collection agencies often provide insurance to your company that helps you avoid losses. They sometimes do not charge if the debt recovery is not successful. These debt collection agencies also have more debt recovery strategies to utilize because it is the focus of their business, which means they are likely to provide higher success rates in dealing with overdue accounts.
And since you are only outsourcing them for the work you cannot handle, you are actually saving a lot of money. Instead of hiring more manpower, you just hand them over the accounts you need to be handled and that is it. Unlike hiring new agents, it is more cost-efficient to outsource the handling of these overdue accounts as they are not always recurring.
Another advantage of hiring a debt collection agency is its credibility. Handling debt accounts is highly risky as it exposes confidential information of the debtor or borrower. Legitimate debt collection agencies have high regards to confidentiality, which reassures not just your company, but your client as well.
Debt recovery might be too much work, but when you apply these strategies, you might be able to solve your overdue accounts in no time.
What did we learn?
