There are many barriers that can keep a business from being able to collect on past due debt. As a professional debt collection agency, we try to mitigate many of those barriers. Many small businesses have more of those barriers than some larger businesses. Lack of training and experience in debt collection, lack of resources, and lack of legal power are just a few of those setbacks. However, there is one setback to debt collection that any business can eliminate, whether they plan to collect in-house or use an agency: proper documentation.
Why Documentation Matters
When someone owes a debt they don’t want to pay, the first thing they often attempt to do is to say they don’t owe the debt. They may say that they didn’t receive a product or service, they never received a bill, or that the creditor has mistaken their identity. Another common tactic is to claim that the debt is older than the statute of limitations. One of the reasons these strategies are so common is that they work. Dishonest customers know that some businesses don’t keep good records and may have trouble verifying the debt. This is why it’s crucial to document transactions every step of the way.
Contracts and Service Agreements
Some small businesses like to operate as casually as possible with their clientele. They mistakenly believe that using contracts and service agreements, they will turn their customers off. Unfortunately, the days of being able to rely on handshakes and a good name are long past. Today, our legal structure around debt and liability is much more complicated than it used to be. “Gentlemen’s Agreements” no longer hold up in court.
Contracts are one of the most feared and misunderstood documents for some businesses. The truth is that contracts protect both parties involved. They assure both the client and the service provider that the other will stick to their end of the bargain. They also lay out specifically what the bargain entails: who owes what, when they will get it, and how.
Service agreements are a different kind of agreement that is similar to a contract, but not quite. A service agreement is less formal and less likely to stand up in court if a dispute arises. However, it is always better to have an agreement in writing than not. If you have a service agreement, at least you have an outline of your terms that has been signed by both parties.
Files and Organization
Once you have systems and processes in place to document your agreements, next you need to make sure that system is organized. Disputes often arise long after the time of service, so it’s important that you know where to find the documentation when you need it. There are a few ways to do this. Most businesses keep paper files in a filing cabinet in the office for a time, then move them off site for storage.
Another popular method of filing is to use digital files. In this case, the business either uses fully digital files transmitted and stored electronically, or they scan paper files to folders on a computer. The most important thing to remember with digital files is to keep them secure with protective software and to make sure those files are backed up. It’s also not a bad idea to keep paper backups offsite in storage.
When It’s Time to Collect, Call Southwest Recovery
Even when you have all your ducks in a row, there will also be customers who don’t pay. When that happens, call us. We can talk to your customers about their agreements and convince them to pay while preserving your good reputation. Call us now to learn more!