Do I Really Need to Document Everything?

Yes. 

Because simply put, documentation is the key to successful debt recovery in almost every scenario. It provides you with a clear paper trail, and a legally binding record of both the debt and communication associated with it. So if, in the worst case scenario you have to go to court, you’ve already got a strong case pre-built. But it can be a bit confusing trying to figure out exactly what you need to document, and why, so today we’re going to go through it, step by step.

The Key Roles of Documentation

There are a couple of key reasons we believe that keeping meticulous documentation is a crucial part of the debt collection process. While there’s no rules that say you have to do it, we’ve found that the businesses who do keep good records are able to recover far more money far quicker than those who don’t. So it’s something we always recommend because:

It gives you legal protection: Proper documentation is vital if you ever need to give evidence in court, or if you’re working with a collections agency. It shows that the debt is valid, what terms were agreed to, and what efforts were made to recover the funds.

It helps with dispute resolution: Detailed records help resolve disagreements about payment terms, the amount owed, or the validity of a debt quickly and fairly by providing a single source of truth that all parties can refer to.

It gives clarity & transparency: Written agreements and documented communications ensure all parties (creditor, debtor, and any third-party agency) understand their obligations and the current status of the debt, preventing miscommunication

It helps you adhere to regulations: Accurate records help make sure all your debt collection efforts adhere to the relevant laws and guidelines. 

It allows you to make informed decisions: It’s difficult to make good decisions when you don’t have all the information, and when it comes to dealing with clients owing you money, it pays to be informed. Documented payment histories and interactions allow you to accurately asses the debtors financial behaviour, figure out if a debt is too old to pursue, and decide on a course of action that will get the best results. 

It makes your accounts receivable much more efficient: Who doesn’t love an efficient department? Well-organised documentation streamlines the whole recovery process, providing you with easy access to the information you need and a seamless handover to a professional recovery agency if you need it.

What Documents do I Need?

The good news is, some of these things will already be documented through other procedures, so it becomes a case of gathering rather than putting new procedures in place. If you go through the list below, you’ll probably find some you already do, so getting everything in place won’t be nearly as time-consuming as you’d thought.

The initial agreement: Every time you start work with a new client, they should be provided with some form of contract, loan agreement or approved payment terms to sign. Not only does this mean that both sides are clear on what’s expected, but it also means there is a formal confirmation of what the agreement was. This should outline the obligations of both parties involved, any interest rates that apply, charges, and penalties for late payment.

Invoices and statements: Copies of all invoices issued should be kept in a folder for each client. At a minimum, these should include their issue dates, due dates and the amount owed. If you’re using software to manage your bookkeeping and accounts, then this should already be being done.

Communication records: Any interactions you have with the client discussing payments, payment terms or invoices should be recorded in one place. If they’re emails, letters or text messages, then copies should be kept. If they’re phone calls or in-person meetings, then detailed notes should be taken and filed for future reference. 

Payment history: Records of all payments made (partial or full), including dates, amount and payment methods. Again, if you’re using software to manage your finances, this will already be tracked and easy enough to create a report of if and when you need to. 

Debtor information: Up-to-date contact information for each of your clients. This includes names, departments, address, and any background information you have on the person/company you’re working with. This information should be reviewed regularly, and if you have a single contact within a bigger business, try to add a second so that if one isn’t responding, you have another avenue to contact them through.

Disputes and resolutions: If you’ve had a dispute with this client, no matter how small, it should be documented. This should include correspondence, any actions taken and the resolutions agreed on. If you’re going through the dispute now, you should also be documenting as you go. 

By keeping meticulous, up-to-date documentation, your business is able to strengthen your position in disputes, protect your legal rights, and significantly improve the chances of a successful debt recovery if it comes down to that. At Debtcol, we love an organised client, but if you haven’t got all of the systems in place to document debts yet, don’t worry. Part of our work is to not only help you recover outstanding debts, but put systems and support in place so that they are less likely to happen in the future. If you’d like to know more, just get in touch with the Debtcol team today and book a confidential, no-obligation consultation.