A guide to eCommerce debt collection for beginners

By on January 22nd, 2019 in Industry Insights
TrueAccord Blog

Dealing with debtors is a frustrating but unavoidable consequence of running an eCommerce business. Even the most experienced sellers can find the issue difficult to manage, but when you’re just starting out it can be impossible to know where to start.

To help you out, we’ve put together this introductory guide to eCommerce debt collection for beginners. We hope it will help you retrieve that money you are owed (plus we’ll take a look at the tricky area of chargebacks).

Getting started with eCommerce debt collection

Startups can live and die on their cash flow. So when someone isn’t paying up that can be a major issue for your eCommerce company. If you’ve tried every tactic to get them to pay the money they owe you should think about working with a debt collection agency. But before you jump right in, you should know that the quality of collection agencies can vary significantly. Make sure to undertake the following three checks before you hire anyone.

Check the agency’s reputation

Whenever you are working with a third-party you must consider how they will represent you. Your brand identity will be one of the single most important factors to eCommerce success so it’s vital you do everything you can to protect it. Unfortunately, we know from our own experiences that some debt collectors can be rude and aggressive, using intimidating methods to retrieve money. However, not every collection agency is like this. Finding a customer-focused collection agency that works with the debtor and not against, helps to increase customer retention and improve brand perception.

Check their processes

Before you start working with any debt collection agency you need to know what is going to be expected of you first. Every collection agency is different but TrueAccord’s process looks like this. Initially, we recommend you notify your debtors that we will be in contact. Then you need to send us the debts you would like recovered. Finally, you need to input your parameters into our easy-to-use automated system. After that you can follow the recovery process on our creditor dashboard which gives you up-to-the-minute information including how much has been recovered.

Check their success rates

Ultimately, there’s no point in working with a collection agency that will fail to secure the money you are owed. The latest stats show that, although consumer debt is one the rise, the total recovered by debt collectors is falling. What does that show? The traditional debt collection methods are becoming less and less productive. FinTech debt collection startups, however, are bucking the trend. TrueAccord, for example, uses machine-learning and AI to more effectively engage with customers on a far larger scale.

Dealing with chargebacks

When it comes to eCommerce, chargebacks can be a huge problem for a new business. If you think a customer has fraudulently made a chargeback claim then debt collection can certainly help you out.

What is the issue?

Up to 30% of eCommerce chargebacks can be put down to buyer’s remorse, a spouse using their partner’s card without their knowledge or friendly fraud. That’s a misuse of the chargeback function, which was introduced to protect consumers from fraud. Even worse, it could seriously affect your business which, as a startup, is going to rely heavily on cash flow.

Can debt collection help?

The good news is that a collection agency can certainly help you retrieve the money you are owed. Now, there are pros and cons of sending a chargeback to collections so the first thing you need to do is communicate with your customer to determine whether the chargeback was fraudulent or not. If it was a legitimate purchase, then the customer is liable to pay you even though you can’t charge their card.

It’s worth remembering that just because you are involving a collections agency, that doesn’t mean you have necessarily lost them as a customer forever. In fact, some TrueAccord customers have gained $2 in additional business from previously lost customers for every $1 we recovered for them. Find an eCommerce debt collection agency that deals with the customer in a sympathetic manner to give yourself the best chance of spinning a negative into a positive.

As you have seen, eCommerce debt collection is a relatively simple process if you find the right company to work with. Remember to do your research and find a company that treats customers sympathetically but still has great results.

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