In the current economic downturn it would seem necessary that all Businesses are efficient in Debt collection from clients on time, but surely this is more serious for a small Company with their own bills to pay, on time. If the client is behind in paying they may feel it best to use a Debt collection agency, which could send out Debt collection letters on their behalf, or the small Company may look for some DIY operation, perhaps from a Business who can give them some Debt collection software that may generate the Debt collection letters for them.
In circumstances where a small Company has insufficient funds to meet its own debts then Debt collection of outstanding invoices from its debtors become crucial in the fight to stay in operation. In many cases the first course of action would be to contact their debtors and remind them of the payment due date, this would usually be a part of the terms and conditions of any contract for the supply of goods or services.
Should this action fail to produce the required payment the small Company may think that they have limited courses of action available with which to chase a bad payer, such as the courts or a choice of Debt collection agencies. The Small Claims Court is limited to claims of £5000 or less and each party must cover their own costs. Higher sums are handled by the County Court or Crown Court and require proper legal representation with attendant costs, where the victor can be awarded their costs to be unpaid invoices without resorting to court, but it is in the best interest of the small Company to ensure that if they go down this route then they engage the services of a fair Debt collection agency for the work, otherwise their own good name may be tainted at the very least if fair Debt collection practices are not used. Fair Debt collection practice includes sending Debt collection letters to the Company owing the money, rather than just sending in the bailiffs right away. Fair Debt collection agencies will most likely offer a no win, no fee service, but you would normally have to speak with them first to know about their fees. The initial contact in itself should be free but the client should investigate the all-in fees before embarking on using the chosen fair Debt collection agency to pursue the debtor for their payment.
However the small Company may not know that they can take direct action themselves, for a small cost that they could get their invoices paid quickly. If they could find out how to do this with the minimum cost and time required from themselves, surely this would be at least worth a try as a first step in trying to recover the debt. There are clearly risks involved in taking this action to Debt collection, not least of which is that a determined non-payer might just treat a letter from the small Company as not worth worrying about and simply ignore it, or possibly worse, phone and make an empty promise of some payment. However, it would seem that any small Company involved in a legitimate line of business would be unlucky to be stuck with a high percentage of bad debtors and so the DIY approach, with the right tools may well bear fruit. Debt collection software could also help in making this method work better for the client, for example in production of tailored Debt collection letters and logging details of what has been done.
The solution would depend on many things, for example the client’s payment history, but the most cost effective method would be the DIY approach to start with, leaving the Debt collection agencies for more troublesome debts perhaps.
Consider this scenario; you have worked for a company who has employed your services on a regular basis over the past couple of years and has always settled your bills in good time, but on this occasion you haven’t had your latest account settled and it is now one month late. You have phoned them to discover what is happening and they let you know that they will be paying their invoices somewhat later than normal and hope to be able to send settlement by the end of the quarter. You have had, what appeared to you as a good client-supplier relationship with this multi national enterprise (MNE) business which is a big name in the area, but their revised time lines for settlement are very much too late for you. You must settle your own bills such as; suppliers for products you had to buy for the work for this business, the wages of the small self-employed group who you brought in to help to provide the service. Also this unpaid account is key to you, but is assumed to be unimportant for the MNE business, and very likely one of many that are also unsettled. So, do you use a Debt Collection business, engage a solicitor, or do you buy a package of information and Debt Collection Software with templates for the Debt Collection Letters and do it yourself?
The last thing you want to do is ruin the relationship you have with the business, so nasty letters and phone calls are out of the question, so what are the choices to achieve this and get your account at or near to the top of the pile?
There are Debt Collection organisations that you could make contact with to do the job, but your experience of these is small and it would result in a trawl through Yellow Pages for whom to phone. Not the best way to find someone you can trust to get your payment made without souring your reputation with the business, and there will be their costs to consider.
You could phone a solicitor and get them to chase the business, but this would possibly work out more expensive than a Debt Collection business and would probably ruin the business relationship.
Another approach that few people may think of for this is the DIY approach, whereby you can purchase the required information and then by way of that, produce a series of Debt Collection Letters that are formal, straightforward and unemotional and follow a known path of the steps required to work towards a satisfactory receipt of the invoice.
The DIY approach to Debt Collection can involve quite a lot of time and effort especially in composing the Debt Collection Letters according to the guidelines in the information pack, then there is posting them off and finally keeping a record of activities in sufficient detail as to be useful should the process proceed into court proceedings. To satisfy these requirements it would be valuable to be evaluating Debt Collection Software which could manage the Debt Collection Letters and the event logging, leaving the user to get on with the postage and entering information such as received letters or better still, the actual paid account.
It is likely that the information pack will be an e-book, which can be used on-line and could be updated as part of the initial purchase. Likewise the same organisation could also have Debt Collection Software available that would be based on the e-book and store the details in a database for later retrieval and printing out.
The costs for such a dual package are likely to be in the tens of pounds region, whereas Debt Collection organisations or legal proceedings are more likely to be in the hundreds to thousands of pounds region, so this is a better path to follow for a small company with limited funds.
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