Debt has become a staple in society. It’s hard to avoid it, and it doesn’t go away easily. Your accounts receivable is piled up with debts from your clients. But just like every other problem in everyone’s lives, there should be a way to solve it, and a debt management plan is one way to do just that. As featured in Small Business Trends, a US bank study and SCORE shared that 82% of startups fail because they run out of cash in the process. You don’t want to be one of the startups that fail due to poor cash management. You can work on it by starting with debt management. However, debt management and in-house collection come with a lot of disadvantages. You need to adapt to the most practical ways that are introduced today. You need to know how to outsource debt management.
What is Debt Management Outsourcing?
Outsourcing is the act of getting services from a third party. These days, most of these third-party companies are located offshore. This means that these are companies that operate outside your country, most likely in places with a lower cost of living but with excellent professionals nevertheless. Nowadays, outsourcing has also become more accessible. Third parties take care of the company’s important financial functions. Modern businesses invest a decent sum of money in payroll outsourcing, credit control outsourcing, and more.
When you outsource debt management, an offshore Business Process Outsourcing company will do the debt collections for you. Debt collection is exactly what it sounds like: your BPO partner gets in touch with your debtors to collect the debt owed. Of course, they will use the data you provide as their reference. They negotiate with your debtors to find out realistic payment schemes, and they do this by sending them a set of demands and letters. The first is an attempt to get in touch with them and inform them of what is owed. The second one is a warning that further action will be taken against them should they ignore the initial correspondence. This can be anything from garnishing their wages up to including legal action.
Debt collection is something that needs communication agility and persuasion. Even though it sounds simple, it can be stressful to send follow-ups to your unresponsive debtors consistently. When a person owes you debt, it is only proper to hire a third-party company for its collection. r
How to Outsource Debt Management
It is easy to find a debt management agency offshore. You can just look at the ads served on your google page. What’s hard to find is a suitable agency for your business. Listed below is your step-by-step guide on how to outsource debt management the right way.
Find Out What Type of Debts The Agency Collects
Some specialize in collecting from corporations, while others’ line of expertise and training is collecting debts from individuals. It is vital to ask your potential partner what types of debtors they deal with for you to weigh your compatibility.
Access to Databases
Have you ever wondered why suddenly a previous customer has become no longer traceable? Skipping a current address is a common move for debtors who are running away from liabilities. To prevent them from being out of your reach again, choose a BPO company that uses skip tracing. Companies that adhere to this have access to multiple databases where they can find the current locations of your debtors.
Make Sure You Are Not Liable for The Agency’s Unwanted Turn of Actions
Entrusting your debt collection to a third party also means that you depend on their ways of getting what is rightfully yours. Even if they have promised great results or possess promising records with their previous and current clients, some debtors can also go to lengths and sue you for any harassment they claim from the collector. To prevent your company from being dragged to court, have your legal team prepare a written agreement about this matter.
The third party’s actions to deliver satisfactory results to you should not reflect on you, since you are only buying outputs or debt collections from them. Additionally, check if they have insurance that can cover them in inevitable times like this. You don’t want to be dragged to court while knowing that you are made liable for the legal expenses.
Source Your Agency From a Trusted Outsourcing Marketplace
Legitimacy and competence are critical when it comes to choosing your service provider. Once you source them from an excellent outsourcing marketplace, this trusted marketplace will then pair you up with the best BPO agencies that can cater to you. These BPO agencies have already undergone background checks, and are well-vetted and trusted in the industry.
Source More Options From an Outsourcing Marketplace for Costs Comparison
A trusted outsourcing company already has a line of reliable BPO partners that produce high-quality work. By having multiple options, you also get a higher chance of getting the best deal. This way, you can compare contingency costs and flat fees that are all from legitimate companies.
To make communication with your potential BPO partners more effective, prepare a PowerPoint presentation or slides with your non-negotiable requirements. The guide above will serve as your basis. Additionally, outsource someone who can help you put the ideal text fonts, sizes, and slide layouts. This presentation will make your negotiation smoother and easier to follow through.
Benefits of Outsourcing Your Debt Recovery Through Collection
Outsourcing your debt collection will still be the smartest move you can make to recover a monetary loss. Here are the benefits you can take advantage of when you outsource from a trusted outsourcing marketplace.
You Reduce Staffing Costs
There are several disadvantages when you use your team in collecting debts. One of these is the expensive hiring costs. Instead of paying a mandatory hourly rate for onshore or in-house hires, enjoy a flat fee and contingency costs when you outsource.
A More Productive In-House Team
Being able to collect as many debts as possible through the consistent efforts of your BPO partner is rewarding. You can use some funds to improve your operations and employee engagement.
Faster Results
Expect faster results from the driven debt collection officers offshore. They are well-trained and nested to do the right thing, negotiate, and persuade your debtors to pay.
You Don’t Make Bad Customer Relationships in the Process
Aside from the stressful process of convincing debtors to pay, these customers or clients might also get the wrong impression of you when you collect directly from the internal.
You can come off as pushy. Direct collection of debts usually causes conflicts and you don’t want that. Staying diplomatic is a skill that makes businesses stand out. Keep your customer service superb by having a third party do the debt collections for you.
In conclusion on how to outsource debt management, the very first thing you can do is to source a list of trusted collection agencies. After that, apply all the other steps mentioned above. You can then easily proceed to negotiate with the company that has your best interests.
