Record keeping might not be the most exciting part of running a business, but it’s absolutely essential in making sure you stay on track. Aside from giving you a more accurate view of your financial standing, good record keeping also helps make your debt collection process smoother and more successful.
Helps avoid miscommunication and mistakes
Proper record keeping lies at the centre of good accounting. By making sure all files are accurate and up to date, you can avoid mistakes and facilitate smoother debt recovery. You can promptly access any relevant information in case clients need further clarification regarding their bill or invoice.
Aides in Dispute Resolution
Accurate, detailed, and complete records gives you a clear idea of how your debt collection process is progressing. This helps avoid confusion and allows you to resolve disputes promptly and fairly. Since all relevant information is at your disposal, you are also much more likely to create a favourable outcome for the parties involved.
Helps You Monitor Invoices
If your credit files are updated and well organised, then it’s going to be easier for you to monitor unpaid invoices. This helps ensure that no account is forgotten and debt collection efforts are dispatched promptly.
Also, good record keeping helps you determine how old the debt is and when it becomes statute-barred. This is when the legal limitation period of a debt has expired, essentially making it too old to collect. The statute of limitations for debts often varies from state to state, but it is usually set at six years.
There are, however, some factors that can reset the statute of limitations. These include receipt of partial payments from the debtor and admissions of the debt. As a creditor, it is in your best interest to keep detailed records of any and all acknowledgements by the debtor. This way, you can extend actionable timeframe for debt recovery.
What Should You Document?
Essentially, businesses need to keep a record of all communication with debtors. These include attempts at contact that were not successful—for instance, when you call a client but they didn’t answer or were not available at the time of your call.
All types of communication, whether electronic, in writing, or in person, should be recorded. This means noting down all letters, emails, and voicemail sent to the debtor as well as all visits that made to the debtor’s office. You must take note of the time, date, frequency, and nature of all contact with the debtor. It’s important to ensure your records are accurate, complete, updated, and easily accessible.
Also, make sure you take note of any payments the debtor makes, whether it is partial or complete. These records should include the amount paid, date, and payment method used. If you and the debtor make a verbal agreement, be sure to confirm those details in writing as soon as possible.
How to Improve Your Record Keeping Process
1. Assess the current status of records
Start by reviewing the record-keeping system you’re using now. Ask questions like: Are all client credit files and payment histories up to date? Are your files arranged in a particular way? Can you quickly access files containing relevant information on your debtors? These questions will help you pinpoint areas of your system that needs updating or changing.
2. Create templates for communication
Produce electronic and physical templates of letters and emails that you can use when communicating with debtors. This way, you won’t have to spend time composing letters to remind clients of their overdue accounts. It’s also a good idea to draft templates that you can complete during a phone call with a client. This will make it easier for you to keep track of what is said in during conversations with debtors.
3. Store records properly
Keep letters, payment receipts, contracts, and other written correspondence in one place. This way, you will have all the necessary information within reach whenever you speak with clients.
Also, be sure to organise files properly and store them in a secure area. As for your archives, New Zealand’s Ministry of business requires businesses to keep records for at least seven years.
4. Always have a backup
Make it a point to have physical and electronic copies of your records. Update both whenever you communicate with debtors. Also, do not forget to back up all your electronic data on either an external drive or an online storage account.
Let Us Help!
Successful debt recovery relies on efficient record keeping, so make sure you do not neglect this part of your business. For more tips on how to improve your debt collection process, get in touch with any of our specialists here at Slater Byrne Recoveries. Call us now on 0800 445 870.