What are some methods that a business uses to collect their receivables?
Cash and carry operations have less to worry about when it comes to receivables, but in this day and age it is unrealistic to believe that every customer will want to make a cash purchase. Taking credit cards and checks can also be an easier way to get paid because of the ACH‘s and EFT‘s clients funds can be transferred for a fee.
In the service industry it is different we allow our clients (depending on the organization) 30 -60 days to pay. The best way to get these types of clients to pay their bill is to offer them a discount if they pay early. I also try to get the client to agree to pay within 30 days before the work is done. We negotiate this in our contract. If the client says 45 days is their regular payment cycle thats ok at least I know when to expect payment (45 days after I invoice them). This cuts down on how long an acct is pastdue. If I send an invoice to a client and I expect payemnt in 30 days and they normally take 45 days to pay after 30 days their acct is pastdue on my end. If I send that client a letter saying Hey your bill is 15 days past due and I will have to charge you interest it could cause me to lose a client. One because my house in not in order and two because they probably where in the process of paying me.
What methods are unethical for a company to use to collect their receivables?
For the most part, a collection agency cannot contact third parties about your debt EXCEPT:
The original creditor
Your parents (only if you are a minor)
A collector cannot contact you:
At an unusual or inconvenient time or place—calls before 8 a.m. and after 9 p.m. are presumed to be inconvenient
Directly, if it knows or should have known that you have an attorney
At work if it knows that your employer prohibits you from receiving personal calls at work.
At what point are collections methods illegal or considered harassment?
Harassment or Abuse
Use or threaten to use violence
Harm or threaten to harm you, another person, or your or another person’s reputation or property
Use obscene, profane, or abusive language
List your debt for sale to the public
Call you repeatedly, or
Place telephone calls to you without identifying the caller as a bill collector.
A collection agency can’t lie
Falsely represent the amount you owe
Claim that you’ll be imprisoned or your property will be seized
Threaten to take action that isn’t intended or can’t be taken—for example, if a letter from a collection agency states that it is a “final notice,” it cannot write you again demanding payment
Send you a document that looks like it’s from a court or attorney or part of a legal process if it is not
We all want to be respected when we do business with others sometimes it is important to remember that our clients are people first. If you are doing business with small business owners who have cash flow trouble you should try to see if you can barter services for products this can help your business and another business at the same time.
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