Debt Recovery Explained
Bad debt is unfortunately an issue which all business owners have to face from time to time. It is therefore key that you have a process in place to establish bad debts quickly and have steps in place to ensure that payment is secured as quickly and efficiently as possible.
Some business owners believe that writing off bad debt is part and parcel of being in business. Whilst this is true to some extent it is also imperative that you are prepared to push bad debtors for payment where possible.
If a business is about to go bust an has £5,000 available and £100,000 of debts the debs which get paid are sometimes the ones which act first!
A study by Leeds University showed that 30% of bad debt occurs because the debtor has cashflow issues or their procedures and systems are holding up payment of invoices.
With this in mind a letter from a debt collection agency advising the customer they have been appointed to secure payment is sometimes all that is required for their account to be settled.
Appointing a debt collection agency needn’t be the end of a relationship as your customers will understand that all you’re really after is to receive payment for the goods and services you have provided them with.
Our experienced staff work hard to find a quick and amicable solution for payment to be secured in a timely fashion, whilst working hard not to damage relations with your customers.
Real people get real results
At Touch we’re not just an endless machine generating threatening letters to your debtors. Our experienced experts speak with each debtor and work with them to come to an amicable solution as quickly as possible. After all cash in the debtors bank account won’t help you grow your business!
Debt collection in action
Debt collection is a very systematic process which we have perfected through our 20 years experience in commercial debt recovery. Here is a look at how debt collection works:
- Step 1: You issue invoices as usual to customers for goods and services you have provided.
- Step 2: You continue to pursue payment by issuing reminder letters and contacting your customer requesting payment. Once debts are 60 days overdue this becomes a bad debt.
- Step 3: You contact a debt collection agency and advise them of the bad debt. They will in turn advise you to send the debtor a Letter Before Action letter (aka. The 7 day letter). This letter will note that if payment is not received in 7 days the debt will be handed to an experienced third party debt recovery specialist who will work to recover payment on your behalf.
It is important to remember that if you send a full and detailed statement and invoice to the debtor and they send you a cheque for less than the requested amount and you accept it, this will be seen as them making an offer to settle the account and you accepting it. Avoid this by requesting payment in full and if the cheque received is lower than the requested amount reject it - unless of course you are happy to settle the account under those conditions.
- Step 4: If payment is still not received another letter will be sent to the debtor advising them that if payment is not received by a set date you will be issuing a court order against them.
- Step 5: If no payment is received we will contact the court for them to help resolve the matter.
At every step along the way we will keep you informed of our progress. We will also be contacting you to advise us on what steps to take next, i.e. do you want to pursue the debtor through the courts etc.
Is debt collection right for your business?
Your business could be suitable to use a debt recovery service if you:
- Provide goods or services to other businesses
- Have debts which are more that 60 days overdue
- The value of the outstanding debts are more than £1,000
Once we receive details of the outstanding debts we will contact you to discuss the case a little further. Once we have all the necessary information we will be able to determine how likely it is that we will be able to secure payment for you.
How much does debt recovery cost?
The key factors associated with the cost of using a debt recovery agent depend on the size, volume, age and portfolio of your debts. Better rates can be negotiated if you pass a high volume of debts with a debt collection agency.
To calculate the true cost of debt collection contact Touch and we will be able to advise you on the cost of recovering payment from your debtors. Once we have all the facts of the case we will also be able to advise you how likely we are to be able to secure payment from your debtors.
Key points to remember:
- After 60 days an outstanding invoice becomes a bad debt
- The appointment of a third party debt collection expert can be all that is needed to prompt your debtor to pay up
- By allowing someone else to manage bad debts you free up valuable time and resources for your business
- Writing off bad debts is an unfortunate part of business, but how much bad debt you write off can be greatly decreased by partnering with a debt collection expert.
- Touch have over 20 years experience in recovering bad debts from other businesses
- Touch don’t just threaten legal action, we speak with the debtor and work with them to resolve the debt as swiftly as possible
- Speak to one of our experts and we’ll be able to tell you how likely we are to be able to secure payment from your bad debtors.
