Considering how long the pandemic and the related economic effects will last, there is uncertainty for many businesses. This is why amplifying the debt collection process will rank high on many businesses’ priority lists so that they are able to secure and generate cash flow. Even though many companies are still fully operational and able to meet their payments obligations, more and more debtors are unable to pay, due to added pressure and uncertainty of the COVID-19 pandemic.
Among the many reasons for not paying invoices; one challenge is evaluating the situation to determine whether the reasons are valid.
It has been tough to collect debts during a global pandemic. In contrast, debt collectors are legally allowed to pursue debtors during the collection process.
With financial hardships in mind, debt collectors must present themselves systematically and make the debt collection process as formal as possible so that all stakeholders are adequately notified and aware of it. They also need to present an emotionally aware and consider that many are suffering through financial hardship. Some ways to assist with making debt collection formal are discussed below:
Communication Is the Key
When it comes to debtors and getting your money, it has never been more important to keep the lines of communication open. Many people will be distracted by current events and may have other issues on their minds. You must keep in regular contact with those who are falling behind or have fallen behind with their payments to arrange for them to be paid back. Consider negotiating a payment plan based on the debtor’s current financial situation.
Affordability Of Debtors
Debt collectors need to know the financial situation of the debtors, and the extent of their debts so that they can make an informed decision on how best to approach and deal with them. This is especially true in the current economic situation. This will help to decide whether a long-term payment plan is a better situation, compared to short-term collections strategy. Whenever possible, use Open Banking data to determine accurate affordability assessments. In addition to credit bureau data and behavioural indicators, forward-looking analytics will help detect the impact of incremental debt on default risk.
Engaging The Debtors
In order to provide the best experience in the overall debt collection process, you must make your systems as open to your customers as possible. By using the right channels and at the right time, you can reach the right customers. Make sure you engage debtors effectively that they don’t slip out of your hands.
Issue Letter Before Action (LBA)
If the debtor does not honour the debt and repay it in full, debt collection agencies will send a letter before action to inform them that further action will be taken. In most cases, debtors want to avoid further proceedings and will take action to do so.
The letter before action outlines three main points.
- Debts being chased and their details.
- Avoiding the letter’s consequences.
- A deadline for payments or a response from the debtor.
The debt collection process is dynamic, so the techniques and modes of operation vary from one company to another. In light of the pandemic, some companies are lenient in their debt collection process, whereas others seek to recover their debt aggressively. In Australia, some debt collectors may not be as professional as they should be when collecting debts, so you should hire a debt collection agency such as eCollect to handle all your debt related issues effectively and professionally.