Whether you do your own debt collection or hire it out to a third party collection agency or collections consultant, at some point collections issues will affect your business. If you know the steps in debt collection you can handle it quickly and efficiently regardless of whether you do it yourself or farm it out.

First, keep in mind that debt collection should cost you no money up front. Some agencies will buy your debt from you, meaning they pay you a percentage of the money owed and in return you give them the right to collect and keep whatever they can get. Another option is to allow them to keep a percentage of whatever money they recover. Either way, you don’t need to pay anything up front so using a collection agency is often a wise decision because they are more skilled at getting a higher percentage of your money back.

Debt collectors work with certain proven tools. You may think you’re collecting debt by sending copies of your invoice but collections letters need to inform the debtor that they have 30 days to respond if they wish to dispute the facts. It’s often a good idea to send repeated copies of this type of letter so it can be a little bit time consuming. In addition, if the debtor does dispute the debt, you’ll have to know how to prove your version of the facts. Debt collection professionals handle this type of problem every day.

The next thing you need to do in debt collection is reporting unpaid bills to the credit bureaus. This often causes consumers to pay on past due accounts because they want to keep a decent credit score.

However, some consumers won’t pay, in which case you still need to actually report the debt to the credit bureaus. This is a very time-consuming process because it often results in a back-and-forth. You report the debt, the consumer disputes it, you have to back up your accusation and the consumer gets another chance to respond. Sometimes the consumer will contact you asking to work something out where in return for payment, you agree to let their credit report be expunged. This is illegal in some places so using a collection agency that is well aware of legal requirements can save a lot of problems down the road.

Finding the debtor when he or she is trying to hide can be very intimidating and often is enough to get him or her to pay up on what they owe you. Most debtors try to avoid calls from debt collectors, and when they realize this strategy won’t work they start to become amenable to resolving the problem.

The final stage in debt collection is when you or your collection agency work out an agreement with the debtor. Professional collections people start out by asking for full remittance but since most people who have delinquent accounts are experiencing financial difficulties, it may be preferable to get them to pay a percentage of the debt owed immediately, or work out a repayment plan.

There’s a lot to be said for getting a partial settlement right away, because the more time goes on the less likely it is that you will recover the debt. However, if you work out a payment plan you’ll also make more money on interest over time, so this is a perfectly legitimate resolution to debt collection problems as well. Either way, using debt collection techniques that debt collectors use will help you get more of your money back.