Nov 05, 2013 Phil Burgess
It's often difficult for private companies to stay on top of debt collection efforts for outstanding accounts. With so many other tasks to accomplish, it can also be challenging for in-house accountants to manage such debt relief efforts. For this reason, some corporations fail to address a large number of debts in a timely fashion, often creating cash flow problems.
However, this issue is not confined to the private sector. Many government agencies also struggle to properly address debt services. Even with access to a significant amount of resources, government bodies are often no better at collecting on accounts than private enterprises.
A recent report from the Small Business Administration's (SBA) Office of Inspector General indicated that the organization has severely mismanaged debt relief efforts during the past several years. According to the release, the National Disaster Loan Resolution Center (NDLRC) failed to collect outstanding payments totaling $752.6 million from June 2006 to June 2011.
The statement noted that the NDLRC did not take the necessary steps to properly pursue payments during the period in question. In particular, the group was cited for failing to analyze debts in order to restructure payment plans and liquidate loan collateral.
Landscape becomes more challenging
Collection on delinquent debts may become more challenging in the coming months and years. Although the industry is always under heavy scrutiny from regulatory bodies, the Consumer Financial Protection Bureau (CFPB) is ramping up debt collection monitoring efforts.
According to the New Pittsburgh Courier, the CFPB started accepting debt collection complaints from consumers in July. In the wake of the Great Recession, lawmakers and regulators are taking aggressive steps to protect consumers finances. With such a challenging environment, private enterprises would be wise to outsource collection to professionals companies.
The Fair Debt Collection Practices Act (FDCPA) has a number of detailed and complex stipulations that limit what collectors can day and say. For this reason, many businesses can be the subject of lawsuits if they attempt to collect on debts by themselves.
Unlike professional collection agents, many other workers are not well versed in FDCPA rules. By outsourcing collection to a relief agency, executives can significantly reduce their chances of being subjected to litigation and may increase the likelihood of closing outstanding accounts.
Perhaps such a strategy could have helped the SBA improve their collection returns. It's important to consider such options because effective management of debt collections can help a company keep a healthy balance of cash.