Independently Collecting a Debt Vs a Debt Collection Agency

Independently Collecting a Debt Vs a Debt Collection Agency?

Being owed money is always a stressful and frustrating position to be in. This is even more true when you are the owner of a business. After all, your company depends on a stable cash flow to maintain itself and to keep growing. If something gets in the way of this, it can put the entire company at risk.

With this in mind, it is critical that any and all owed money is recovered as quickly as possible. Whilst this is true, it is often difficult to know the best way to prompt the debtor into paying the debt.

Many companies take steps themselves, with in-house credit control teams chasing the debt through phone calls and emails. Whilst this can be successful in some cases, it can often represent a significant time and cost investment for the company.

As well as this, your team’s valuable time will be taken up with debt collection. This is instead of performing value-based tasks. As such, it is increasingly common for businesses to escalate the matter straight to a professional debt collector.

Whilst this is a method that provides the most benefits, many business owners perceive the cost to be too great. However, this perception is false, and there are both positive and negative points to attempting to remedy the situation in-house.

We asked our experts to outline the finer points of independently collecting a debt versus instructing a professional debt collection agency.

The Factors of Independently Collecting a Debt

It is common for businesses to take on the responsibility of chasing a debt themselves. There are many reasons for this, for example, they may consider that it will be cheaper to do this alone. Or, they may be unaware that there are other options available.

Owners of smaller companies, self-employed people or sole traders may assume that the cost of debt recovery is too high. Some even ask the citizens advice for options instead of a professional debt collector.

Many businesses give their accounts team the responsibility of collecting a debt. This can be an effective measure, but there are very few options available to enforce the debt. For example, it is common for late payment charges to be added to an overdue invoice.

If a debtor is serious about withholding payment, then no amount of late payment charges will influence their decision making. If this is the case, the matter normally gets escalated to a debt collection professional anyway.

If your business chooses to go with independently collecting a debt, it is vital that you set a cutoff point. A common trap that businesses fall into is spending far too long chasing the debt. There will come a point where it is simply detrimental and not cost-effective to do this anymore. In some cases, this may lead to the debt being written off completely.

Instructing a Professional Debt Collection Agency

Whilst many perceive the cost of instructing a professional to be too high. In actual fact, it is often smaller than the cost incurred of collecting it independently. Many debt collection agencies operate on a commission-based price model.

As well as this, there are specialist collection agencies that focus on commercial debt collection. They will be able to utilise proven and effective debt collection processes that collect money in a timely manner, whilst resolving the matter amicably.

It is important to remember that whilst the main goal of debt collection is to recover money, it is also vital that client relationships remain intact. As such, a specialist agency takes every step possible to ensure that the matter is dealt with properly.

For example, Federal Management is regulated and approved by the Financial Conduct Authority (FCA). This means that clients have peace of mind that all cases are handled professionally and correctly.

As well as this, Federal Management is regarded as the UK’s leader in commercial debt collection. Our debt experts have helped thousands of businesses recover millions of pounds worth of unpaid debt.

If you are considering independently collecting a debt, it may be worth speaking with one of our experts today. We will be able to advise you on the best course of action. This is as well as what the benefits of a debt collection agency will be.