Resolving delinquent accounts with debtors is not easy. You often have to make uncomfortable phone calls to debtors and collect money from them for their bad debt. If an individual or family is in a financial crisis or suffering through a difficult time, the call can even more litigious, as they often do not want to hear from someone who is trying to get money out of them.
Essentially, a bad debt definition would be an amount owed by debtors that they are not likely to pay off. This could happen with individuals who are facing bankruptcy, or companies that are facing liquidation. This is often true for small business, as more than half of all new companies fail within the first 5 years, according to the US Small Business Administration. Maintaining positive cash flow is vital to a company’s success, and if they are unable to maintain this, they have no choice but to fold, and any loans they have taken out could turn into bad debt.
For this reason, many companies plan for delinquent accounts from the beginning, and often factor these into their profit and loss margins. They often also look into bad debt recovery, which is a debt that has already been written off as a bad debt and is recovered either in part or in whole.
Another thing you will want to keep in mind as you recover bad debt is how you interact with your debtors. Since finances can be a sensitive topic, leaving more than one message daily for a debtor is not advisable. You also need to make sure that your messages do not defame a debtor or threaten him or her. Also, if it is unlikely that a large debt will ever be paid off and it has been delinquent for at least 6 months, you could consider offering the debtor a one-time, significant discount to resolve the account.
The main thing to remember is that companies and people with bad credit do not want to be in this position. Unfortunate circumstances hit everyone at some point in life, and can lead to financial duress. You cannot stick by a strict bad debt definition, remain rigid on the phone, and hope to get any response from debtors. Try to remember that they are regular people who may be facing tough times. It might just get you the result you are looking for. References.
