How Debt Collection Works
Mention the words debt collection or debt recovery to most people and they immediately get a vision of a burly tattooed bloke with a crew cut, limited vocabulary and baseball bat. The reality is far removed from this.
While there may be unfortunate times when your business needs to employee the services of a bailiff (who may or may not look like your mental picture), there’s a long process to go through before they can just turn up on your debtor’s doorstep to take away their car, computers and first-born child. When you engage the services of a professional debt recovery business, there is a process to follow, and this process happily gives your debtor many opportunities to change their mind and settle your unpaid invoice.
Attempts to Contact
The first thing to do with a debt is to contact the company that owes you money and find out if there’s a reason why they have not paid. Perhaps they claim that they didn’t receive your invoice, or perhaps your invoice was incorrect and is now sitting in the ‘disputed’ pile. While sometimes these reasons are just excuses to avoid paying, sometimes they are genuine. Best of all, they’re quickly and easily resolved.
Payment Plans
If a company says that they are in financial difficulty or can’t pay you, then the next step is to see if you can agree on a payment plan for the debt. Here, the debtor commits to pay the debt in instalments over an agreed length of time and in agreed instalments.
It’s important to at least attempt to reach a compromise with the debtor because if you do end up in court, judges will look more kindly on your side of the argument when they can see that you have tried to act in a constructive way to settle the dispute without taking up expensive court time.
Final Warning before Action
If you can’t agree on a payment plan, or the debtor is unresponsive, then the last step before going to court is to issue a final demand. This communication will be sent by both email and by registered mail.
Here you issue a deadline after which if the debtor has not paid in full you will commence legal proceedings to recover your debt. Before issuing such a demand it is important that you are absolutely committed to following through. It's not good practice to issue threats and not act on them, and doing so could be interpreted as harassment.
CCJ
If the debtor does not respond to your final demand or they do but you can’t agree on a payment schedule, then you have no further options except to take them to court. The process of taking a debtor to court is described in detail here.
Court Judgement-backed Payment Plan
The most likely outcome from a court action is that the judge imposes a payment plan on your debtor. With a judgement backed payment plan you’re in a much stronger position than a payment plan agreed between you and the debtor. If the debtor fails to pay you at the agreed time you can apply to the court for a warrant for agents to seize property and goods to the value of your debt. It is only at this point as a complete last resort that the agents get involved.
Why use a Debt Collector?
Of course it’s possible to do all of this yourself, but you’ve probably got more constructive things to do with your time. The big advantage of involving a third party collection service is that it sends a clear message to the debtor that things have got serious and it’s time to pay up. If the debtor company is financially stressed, then they’re probably juggling who gets paid at the end of each month. By elevating your late invoice and involving a specialist in business debt recovery that has the know-how to see the process right through to court, you’ve just moved your invoice right up to the top of the list.
How we can Help:
Outsourced Credit Control Service
