It’s an unfortunate reality in business that not everyone pays their bills. No matter how careful you are about setting proper payment terms and sending reminder letters, there will always be some portion of your receivables that are difficult to collect.
Classically, the process for recovering a portion of the debt owed has been to either outsource the uncollectable debt to a “Collection Agency”. A Collection Agency will attempt to collect the delinquent debt and charge a percentage of any funds recovered.
Historically the methodology of collecting debt was not amicable at all till the US government intervened and introduced debt collection laws like the FDCPA and TCPA. FDCPA is a consumer protection amendment, establishing legal protection from abusive debt collection practices.
Earlier the Debt collectors regularly badgered delinquent accounts, threatening legal action when necessary. These fear tactics could be effective, but they also soured any future relationship between the debtor and the original company.
And this was a problem because many people that fall behind on payments don’t do so out of malice, or a desire to steal from the companies they do business with. They have a legitimate reason when their bills go unpaid. They even have a strong desire to pay off their bills as soon as their financial condition improves.
They may have lost a job, encountered large, unexpected expenses, or suffered some other financial setback that prevented them from settling their debts. These are people that want to pay, but can’t for reasons outside of their control.
Given time, they would likely return to being customers in good standing, once their circumstances improved. But the likelihood of this happening is drastically reduced when standard, confrontational debt collection techniques are employed.
There’s a Better Way
Confrontational debt collection assumes that your delinquent customers are terrible people, actively trying to rip you off, and it treats them that way. Since this frequently isn’t the case, it’s far better to try and come to an amicable solution that respects your customer’s situation and works to establish repayment terms they can afford.
Consider someone that’s missed a few paychecks and doesn’t have the savings to pay what they owe. Calling repeatedly and threatening lawsuits if they don’t immediately settle their balance isn’t going to change their situation. If they can’t pay, they can’t pay.
A structured payment plan, on the other hand, would reduce the amount they need to pay right now, allowing them to pay off the remainder in affordable increments. Brokered negotiations allow both parties to come to a solution that works for them, allowing the creditor to recover some portion of the money owed them while providing the debtor payments that don’t further damage their financial stability.
Amicable recovery is a fundamentally different way of approaching debt collection because it assumes the best about people instead of the worst. It’s less confrontational and more cooperative. As a result, it’s generally more effective, and it’s certainly less expansive than the legal proceedings that might be necessary without it.
If you’re facing uncollectable receivables, it’s worth considering amicable recovery solutions before resorting to less friendly methods. Your customers likely want to pay you, and if you work with them, they can. And when they do, it’s likely that they’ll be grateful, loyal customers for life.
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