The Benefits Of In House Collections, Over Debt Collection Agencies

Debt collection is one of those things businesses wish they didn’t have to deal with but ultimately is a crucial step in getting paid on some occasions.

Businesses that extend credit, run the risk of the customer not paying on time or at all.

If that happens, there are three main debt collection options. Below we identify the pros and cons of each in turn:

DIY Debt Recovery – In House Debt Collection

Over a million money claims are started at court each year. The vast majority of those claims are started by the business or person itself, rather than through a lawyer. Many businesses like yours are already using the courts themselves to recover payment of invoices.

Many people think you need to have a solicitor to go to court but that is not the case at all. Many businesses dispense with the need for a debt collection agency or solicitor, to deal with it themselves.

ILike DIY at home, you just need the right tools and to be shown what to do.

Many people assume starting a claim is difficult or stressful but it really isn’t. Once you know how to do it, you can repeat it over and over again if necessary.

You keep control and dictate the pace you proceed at, rather than being one of many clients a debt collector might be juggling at any one time.

Even if you start a claim and it becomes disputed, you still have the option to involve a solicitor or direct access barrister, if you want assistance later on.

Debt Collection Agencies

Debt collection or debt recovery agencies, use persistence to get invoices paid. There is often a confusion that debt collection agencies are bailiffs or have similar power. They are not.

Debt collection agencies have no power to force anyone to pay. It is only officers of the court (a County Court Bailiff or High Court Sheriff) that can take money or assets away once a CCJ has been obtained.

Debt collection agencies have no teeth and any business debtor that knows they have no powers to enforce, will ignore the demands for payment and their attempts will be ineffective. They are all bark and no bite.

However, receiving a letter or call from a debt collector can get the debtor to engage as they realise you have escalated things and are not yet prepared to walk away from pursuing the debt.

Debt collection agencies typically charge a commission on any sums recovered and some operate on a no recovery – no fee basis.

Very quickly, debt collection agencies will abandon attempts to chase difficult debtors. They want easy quick wins to earn their commission.

Financing Options

There are also potential financing options to help with cash flow issues.

Factoring companies might be prepared to advance money on unpaid invoices for a fee and likely on condition the advance needs to be repaid if the debtor does not pay.

Lenders might be prepared to lend or extend credit (ie an overdraft) but will likely seek security and / personal guarantees for sums advanced.

You should seek professional advice upon the options.