Credit Policy for businesses and how to extend credit and manage credit risk

1. A new customer does not respond to the first notice. For some unknown reason, the consumer will not or cannot pay. Potential losses could be kept to a minimum by prompt referral to a collection service.

    

2. Payment terms fail. In some cases irresponsible consumers pay when and if they want to. This group is responsible for 25 to 50% of the cost of collections. Cost and potential losses are reduced by quick action on your part.
3. The consumer makes repetitious, unfounded complaints. Such consumers are often better handled by collection specialists, especially if you don't have a credit manager.
4. The consumer totally denies responsibility. Without professional help, these accounts are usually written off as total losses to bad debt.
5. Delinquency coexists with serious marital difficulties. These also require professional collection help, with the added urgency of obtaining payment before the disappearance of one or both of the responsible parties.

    

6. Repeated delinquencies occur along frequent changes of address or jobs. This group is responsible for 90% of all "skips". A skip is a consumer who has moved without informing creditors or leaving a forwarding address. The chance of finding a consumer and collecting a debt will decrease over time, so quick action is important.

    

7. Obvious financial irresponsibility is apparent. In such cases, little hope exists for voluntary payments and a quick settlement.

    

8. There is an unauthorized transfer or disposal of goods delivered in a conditional sales contract. Often only prompt professional assistance can make any recovery.

    

I hope these top 8 reasons to utilize a collection agency can help you when you have to make the decision to try to collect yourself, use an agency or write something off to bad debt. People always ask me when to use an agency so I hope these tips can help you!  Good luck!