Stages of debt collection management

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Debt collection management is necessary, since this is how companies can collect outstanding debts from their clients. Successful debt collection management will allow the company to have a positive cash flow, as well as buy whatsapp mobile number list liquidity to boost its growth. Regarding how to develop good debt collection management , it is important to consider the different stages of debt collection management . Below, we will discuss each of them.

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Stages of debt collection management
Preventive collection
Administrative collection
Extrajudicial collection
Judicial collection
Implement a debt collection management system on autopilot

Stages of debt collection management
Regarding the stages of debt collection management , we can divide them in different ways. On the one hand, the division can be based on the types of debt collection management , and on the other, through the strategy for debt collection management.

Regarding the types of debt collection management , they can be divided into four stages: preventive collection , administrative collection , extrajudicial collection and judicial collection .

Preventive collection
The importance of preventive debt collection management lies in preventing clients from falling into arrears. To do this, it is necessary to start by identifying those who have a high risk of falling into this category. The factors that can be indicators of this client profile are: financial difficulties or a weak cash flow.

Through automated collection systems we can also carry out preventive collection tasks, since these online collection softwares facilitate the segmentation of clients and the issuance of payment reminders in a moderate and automated way.

Administrative collection
Administrative collection covers the period from the first day of late payment of the debt until the 30 days following. During this period, a series of actions must be developed to encourage payment of the debt, so it is important to carry out a detailed follow-up of the clients.

The type of collection messages carried out here consists of notices and claims for delinquent customers . These communications can be carried out through collection messages via WhatsApp , collection phone calls , collection emails and even text messages.

Extrajudicial collection
This stage of debt collection management begins when the debtor is more than 30 days late in payment. It extends up to 90 days from the initial payment deadline. During this phase, it is normal for the affected company to notify third parties of the late payment, whether state entities or credit risk centers.

A delay that involves extrajudicial collection increases the value of the debt and the amount of interest ; however, it is not yet necessary to start a judicial process. Creating an effective collection speech is important so that the debtor can understand the magnitude of the problem in the event that the period of delay in payment increases; it is important to include the solution that is being offered to prevent the collection from going to judicial levels.

Judicial collection
This is the stage of debt collection management that occurs when the client and the creditor do not reach an agreement. This stage is not convenient for many companies, since it involves expenses in paying lawyers and in actions to recover the debt, so it is important to have a debt collection management strategy that allows the debt to be settled in one of the three previous stages.

4-Automate your collections management

Implement a debt collection management system on autopilot
Integrating a debt collection management system on autopilot will help in each of the debt collection stages. In this way, no client will be left uncontacted and there will be updated reports with information on the communications that have been had with each of them, as well as the status of debt collection communications to clients , streamlining the processes and allowing timely action to be taken. Learn about Moonflow's specialized automatic debt collection software here .