A business without a good debt recovery system is like a bucket with big holes in it. No matter how much effort you expend filling it up, your bucket is only ever partly filled. In India debt recovery management is taking a pace for the healthy functioning of the businesses, It was introduced in the country by foreigners in early 90’s. Since then this sector has continued to expand and demanded major changes in the way debt was recovered. Most of the organizations have their efficient in-house counsels to look after such issues and collections department to execute the same. But an unpredictable economic environment sometimes puts financial pressures on a few customers, leading them to a situation of increasing debt. As a result, they delay their payments and clock up outstanding bills; simultaneously, businesses are hard-pressed with the challenge of retrieving this owed debt back in a timely way.
If you are one of those businesses, then you would understand how hard it is to retrieve the debt while adhering to the industry best practices. Not only is debt collection a time-consuming process, but can also divert you from achieving your core business goals while spending an unnecessary amount of money.
In this article we will discuss as to what is outsourcing of debt recovery and why it is essential in this business era.
What is outsourcing of debt recovery?
It’s a simple process of hiring an organization that specializes in debt recovery management to collect their client’s unpaid debt on their behalf from their debtors.
Importance of debt recovery outsourcing
- Time Management- These dedicated organizations are specialized in helping companies recover their debts promptly because of the systems and processes their team follows to speedily recover their money.
- Money Saving- The faster the companies are paid, the better it will be for cash flow, so they will save money in the short and long term.
- Maintains Customer Relations- These organizations’ well-established approach for soft debt collections involves giving importance to both their client and the customer, so that the reputation of the company’s brand is never adversely affected.
- Early and Late Stage Debt Collections- On your business’ behalf, these debt collection management organizations can contact customers or debtors who have defaulted on payment and offer them options in debt restructuring.
- Reduces Burden- These organizations reduce the burden of in-house counsels by personally chasing the unpaid money in a professional and ethical manner.
- Data Validation and Customer Tracking Services- For customers or debtors whose contact information has changed or who have defaulted for a long period, these organizations can attempt to track them down.
- Dispute Management and Resolution- These organizations’ debt collections’ executives are trained for dispute management and resolution to ensure the best possible outcome for your business.
Outsourcing has become a very frequent practice, every other organization is opting to outsource their work so that they can emphasize and focus on their core competencies. Similarly Companies have opted to outsource their debt recovery instead of chasing the money themselves so that their time and money both are saved. Outsourcing of debt recovery is an under- utilized alternative method, despite being more beneficial its potential has not been fully exploited.
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Disclaimer – the above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.