Debt collection is a service that exists to help businesses manage overdue debt owing from customers.
Collection agencies have comprehensive systems and human resources to manage large volumes of debt in an efficient and effective manner and the services they often provide can vary from active debt collection services to field agent services such as process serving and asset repossession.
However, before engaging with a debt collector, it’s important to understand the process and the key things to look out for when deciding on the right collection agency.
Below, we have summarised a short guide to debt collection to help business owners make informed decisions before engaging a debt collector.
Step 1: What are your needs?
Prior to engaging a debt collector, it’s important to first work through what level of assistance the business may require in order to resolve the overdue debts.
Debt collection agencies come in different shapes and sizes, with many firms taking different approaches to recovering overdue debt.
Business owners and accounts’ teams that are seeking to have their overdue accounts brought up to date but want to maintain client relationships, may want to consider collection agencies that adopt a lighter collection touch.
Equally, business owners and accounts’ teams that face challenges from stubborn, difficult customers, may require a more hands on approach from a boutique collection agency to proactively resolve the overdue debt.
Step 2: Will you be prepared to take a reduced sum or payment arrangement?
Throughout the debt collection procedure, it is common for a debt collector to negotiate a reduced settlement sum or payment arrangement with your debtor. This often represents a commercial outcome and avoids the need to incur further time and cost in pursuing the debtor.
From the outset, business owners and accounts’ teams should consider whether they are prepared to accept a reduced settlement sum or payment arrangement.
If there is limited flexibility in the collection policy, business owners will need to consider the options available to them through legal channels.
Step 3: What is your tolerance for legal action?
If debtors are unresponsive to formal debt collection procedures, business owners need to consider their tolerance for legal action and the cost of doing so.
This will often take the form of a debt collection agency recommending a law firm that specialises in debt recovery proceedings.
If there is a limited tolerance for formal legal action, it always important to seek out a reduced settlement sum or payment arrangement with the debtor. Collection agencies are expert negotiators and will typically be best placed to secure a favourable outcome.
Engaging a Collection Partner can be a new and daunting process for some SMEs. At Debtplacer, we seek to provide the tools and resources necessary to enable business owners and accounts’ teams to make informed decisions about how they wish to proceed with debt collection and ensure that any surprises along the way are minimised.
To find out more about Debtplacer, our Collection Partners, or the debt collection process more generally, please get in touch with us and we would be happy to assist.