Debt Collection Issues with Individual and Commercial Clients

Running a business is dynamic and complicated

 (photo credit: INGIMAGE)
(photo credit: INGIMAGE)
Running a business is dynamic and complicated. Companies render services or deliver products in exchange for payments. Clients are broadly classified into individual clients (B2C) and business clients (B2B). 
B2B or Commercial debts refer to outstanding payments from your business clients. Many commercial debts often go unpaid for long periods, creating financial problems for businesses. Commercial debt recovery (or B2B debt collections) refers to the process of recovering these overdue payments.  
Consumer debt collection refers to B2C debt recovery. In this case, the debtor is an individual. Some examples of consumer debt include - Non-payment of a medical bill, mobile bill, student loans, mortgage, utility bill, unpaid rent and parking tickets. Medical bills form the largest percentage of B2C debts. Medical debts include unpaid, dental, medical and veterinary debts.
Here's a look at some of the most profound challenges companies face during commercial and consumer debt collection.
Insufficient or incorrect information of debtors
This mostly boils down to not having a way to contact the debtors. This is often due to 

1. The debtor has moved, and his address and phone number have changed. The contact information in your system is outdated.


2. Your own staff's data entry error is one of the leading reasons for having incorrect information in your system.


3. The debtor intentionally used a contact address that does not belong to them. 
Professional debt collection agencies use advanced skip tracing techniques to find the latest information on debtors. They sometimes even fetch the credit score of the debtor to evaluate his/her ability to pay.
Addressing debtor excuses of non-payment
Your debtor could be facing a financial crunch that could be temporary or permanent. One of the best ways to address this problem is to put your client under a payment plan rather than attempting to collect entire money in one go. If the financial situation of your client looks dire, then settle for a one-time payment even if it lower than the full amount owed. Insist on advance payment for any more product or services that will be rendered by you. 
Minimum knowledge about Debt Collection Laws
Even if someone owes you money, it does not give you a legal right to harass him for payments. There are strict debt collection laws that collection agencies must follow to avoid getting sued. In many states, these laws apply to the original creditor too. Rules are more stringent for consumer collections when compared to commercial collections. Debt collectors of a collection agency are adequately trained to follow the national and regional debt collection laws. Despite their collection fees, a professional collection agency turns out a far better choice because they can usually get your money, which you would never be able to collect yourself.
Commercial debt is relative easier to collect than consumer debt because the primary debt collection law ( the federal FDCPA debt collection law) is not applicable for commercial debt and debt collectors have far more tactics available at their disposal to maximize commercial loan recovery.
 
Types of services that a collection agency offers
There are three types of services that an agency will offer you.

1. Flat fee option: A collection agency will charge about $20 per account for each account regardless of the balance.
2. Contingency fee option: This is a No-collection No-Fee model. A collection agency makes money only if it recovers money for you.

3. Legal option: A collection agency will engage an in-house attorney or a partner attorney and attempt to garnish wages, put a lien or take permission from the court to take money from the debtor's bank account.

Companies have been hiring collection agencies for decades and each year they recover billions of dollars for their customers. A medical collection agency can systematically, diplomatically and even legally recover money from consumers. Without them, businesses will incur tremendous losses leading to job losses and in many cases, even shutting down of a business.