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The Best Choice for Debt Collection

Debt collection is always an embarrassing thing for both creditors and debtors that is why it is time consuming and sometimes breaks the relationship between lending and borrowing parties. Did you suffering from such kind of unpleasant experience? Or did you hesitate whether to lend money to the one asked for many times?

If the debtor is a man of his word, you don’t have to worry about debt collection. But if not, you need to think about how to get you money back from the day you lend money out. I’ve seen a lot of examples that creditors finally gave up collecting their money back because of debtors’ bankruptcy or Repudiation. The situation could even go worse that creditors, no matter persons or companies, ended with very serious financial problems caused by the money not collected in time.

Therefore, debt collection is an important factor in the success of finance management.

Extra money can be used in investment and successful one could bring in more profits. Lending could be one way of investment but it must be the one with high risk. Bad debt is the worst case of lending because it take time and energy, and you are still not sure about whether the money can be collected back.

If you happen to encounter debt collection problems, it will be a better choice for you to engage with a professional debt collection company. They have targeted strategy and effective methods in debt collection. In addition, they have no relationship with your debtors thus it is easier to talk about the money issues with debtors. A lot of people do not like to ask for money back because the debtors are their friends or partners. Debt collection becomes a harder task especially in these cases. However, do you really give up your money willingly? If not, it should be your best choice to consult a debt collection company.

The Fundamental knowledge on Debt collection services

 Most people who owed debts either from credit card bills, unsecured loans from banks or loans with high interests from the credit agencies aka money lenders will be dreadful on hearing calls from the debt collection officers whom may also pay them house visits on the routine basis.  Sometimes they will even go to the debtor’s workplace to chase for payment which eventually may cause the debtors to lose their jobs. However, the practice of site visit to the debtor’s offices is outlaw in many countries as it is considered as a form of public disturbance.

While the above mentioned maybe a daunting experience for most debtors. It will be a different experience if they have a basic fundamental knowledge on debt collection services. That will mean the time period, process and how the debt collection officers work to achieve their goal to get the payment from the debtors.

On the individual level, most of the debts they incurred are known as delinquent debt which means as long as the payment due date is overdue for more than 60 days, it will be considered as delinquent debt.

Most debt collection officers work for agencies but experienced officers will work independently either by outsourcing their professional services to the agencies or directly to the companies aka the creditors. These debt collectors earn their income based on the percentage of the debts recovered which is usually between 20 to 40 percent of the debts recovered. But the usual practices are that the higher percentage of the debt amount is recovered, the more the debt collectors will earn.

The standard terms & conditions set by the Debt collection agencies or licensed debt collection officer will be based on the specified amount and how long is the debt being due which is usually more than 60 days but less than 2 years in most cases.

In scenarios when the debts are too big in monetary value and the debtors are unable to pay due to financial reasons like long term unemployment or health reason like physical or mental disability. The debt collection officers will assess the situation and either request for the lesser amount or payment by instalments, upon the agreement of both the creditors and debtors.

As mentioned earlier, there are several methods to collect the debts but most of the debt collection agencies or private debt collectors will followed a standard practice and code of conduct which is approved by the local authority.

For example, the first point of contact will be via letters, emails and phone, followed by site visit debtor’s house. If debtor is not contactable, the debt collector will use various means to search for the debtor’s location and also inform credit bureaus of the unpaid debts which will indirectly force the debtors to clear their debts. Finally, if all else failed, the debtors will usually receive the legal court’s order to freeze their assets for repayment of debt.

Instead of avoiding the debt collectors, the best way is to negotiate with them on how to settle the debt payment as most professional debt collectors will assist the debtors by providing solutions to clear debts and create a win-win situation for both parties.

What is accounts Receivable?

Accounts Receivable or commonly known as AR is common term which is part of the company in-house accountant task to manage and to receive payment on monetary value from their clients after providing goods and services to them which in turn will be accounted for on the company’s balance sheet.
For example, a manufacturer of a kitchen stove will have an accounts receivable which they will bill as invoices when the Kitchen stove is delivered to the restaurant owner who is their client. Depending on the agreement contractual terms, the restaurant owner will normally have 30 days make the payment to the manufacturer with effect on the day they received the stove.
Some of the companies especially in the marine sector will sell their products and services on credit terms but often incurred certain risk that the full amount of their account receivable may not be received in time. Which unless the company has deem and justified the credit worthiness of their customer to sell their product and services on credit terms.
Part of the accountant job is also to monitor and chase for payment from their client if the payment period has expired. This is easily done as there are many accounting software tools that can allow accountant to keep track of the payment records of their customers.
In events when the payment for the accounts receivable is overdue for too long due to reasons like the customers are non-contactable or disputing on the quality and other contractual terms of the quotation. Companies will have the legal right to engage a third party debt collection agency on their behalf to chase for payments and in exchange for the service fee or certain percentage of the amounts receivable successfully collected.
Thus it is important for the company to manage the accounts receivable properly as it relays as the main source of income for the company’s balance sheet.