If you are dealing with a customer that is past due and are not getting any results, you might be thinking about sending the account off to a collection agency. Some businesses will offer their past due customer a settlement option before sending the account off to an agency. How can you decide if this will work for you?
Offering and accepting a settlement payment to get the debtor off your books can work out well for you. There are some things you should know before you decide to do this. Settlement offers work best with customers that have a high balance due. You want to offer an amount that will cover your costs, hopefully make you some money, and set a date that the offer is good for. When offering settlement options you must be FIRM.
If someone owes you $12,000.00 that is 6 months past due and you know they can pay you $10,000.00 to pay that off you should think about offering them a settlement letter. A settlement letter should state what the total balance due is, what you will accept as payment in full and the date that payment has to reach you by. Never change this date, and never accept payments on a settlement payment.
A settlement payment should be the full amount you are looking for, in this case $10,000.00 and it should be in your hands by the date you specify. If not, the offer is withdrawn.
If you have already reported the debt to the credit bureau, you can report the debt as being paid as a settlment payment. This will be reflected on the debtors credit report as a "good" credit item, since it shows they paid but does state the account was "settled" for a lesser amount.
Some things to consider when offering settlement options are does this debtor have a tax return coming soon in the mail that they could use to pay the settlement amout? Do they have a christmas club account that they will be receiving that they can use towards the settlement? Be aware of when your customers are receiving larger sums of money like this so you can offer the settlement when they are able to pay it. This helps you clear them off your books, get paid and helps them have one less bill to worry about.
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