We take a closer look at the professional debt collection process.
Getting paid for your products and services are the cornerstone of any business plan. There are few things are more frustrating than having your cashflow disrupted by clients not paying their invoices. As you probably know, cash flow is key to any business and can be the difference between success or failure.
There comes a time when you’ve followed up on the overdue payment to no avail. No matter how many times you have requested rightful payment for goods or services provided, you have made no advances in getting the invoice paid. It may be time to accept that your late-paying client has become a non-paying client, or worse still, a runaway debtor.
If you have exhausted every possible step of your in-house debt collection procedure, you might be wondering if it’s time to turn to the professionals. Here, we look at the steps, techniques and legal rights that debt collectors use to make sure your unpaid invoices get paid.
4 key characteristics of professional debt recovery:
1. Fine-tuned debt collection processes
Professional debt collectors have a streamlined, step-by-step process for recovering debt. Their efficient process, combined with years of specialist experience, means that a great debt collector often gets faster results with more chance of a successful resolution.
From issuing a reminder letter for payment to following up with calls and SMS reminders, conducting searches and investigations, offering payment plan management and, if necessary, pursuing legal action. Professional debt collectors have a streamlined selection of debt collection tools and techniques at their disposal beyond the average businessperson’s repertoire.
2. Tools for tracing runaway debtors
If your non-paying clients have become runaway debtors, you may be wondering how debt collectors find them in Australia (or even overseas if necessary).
Effective debt collectors use a variety of professional tracing services, databases and paid search engines to conduct location searches and in-depth investigations to track down persons of interest (runaway debtors beware!). These services are also available in Australia, where there are much stricter privacy laws and less tracing in comparison to some other countries.
3. Ability to leverage the law
Collection agents have an in-depth understanding of the ins and outs of the debt collection code of conduct and the Australian Competition and Consumer Commission’s debt collection guidelines.
Additionally, any respectable collection agency has expertise in debt collection rules and legalities. They’ll know your rights as a creditor, the rights of your client and how to avoid costly legal action by knowing the most effective channels.
Typically, a professional debt collector will step-in between the expiry of your letter of demand and the first step of legal action. They may be able to reduce the cost of legal action or avoid matters being taken to court altogether. This is particularly the case for debt collectors who enjoy strong working relationships with debt recovery lawyers.
They are also familiar with undertaking legal action and can help throughout the process, with field agents assisting with out of office tasks such as serving a court order. Once legal action is underway, the recovery process may typically involve sending a statement of claim to the debtor, then hopefully being awarded a court judgment, and finally enforcing the judgement (If payment still isn’t received) through further action, with the majority of costs being added to the debt.
4. Debt collection professionals focus on logic rather than emotion
Debt collection agencies take emotion out of the debt collection process. They make sure it is entirely factually based. They don’t have a history or ongoing client/supplier relationship with the debtor complicating the recovery process – instead they simply act as an independent extension of the accounts department.
As an impersonal third party, a good collection agent will maintain an amicable, professional manner with your debtors, peers and suppliers throughout the process. What’s more, in the event of a dispute, debt collectors can act as a mediator between you and the debtor, whilst being on your side and acting in your interests.
Collection agents are also less likely to accept unproven excuses for non-payment, thanks to specialist resources and processes for determining and confirming genuine financial hardship.
Sometimes, all it takes is the involvement of a third party to signal to the debtor that you are serious about recovering that payment. In some cases, simply having the matter escalated to a debt collector is enough to finally see the overdue payment settled. Having professional support behind you is a great way to encourage debtors to pay. They can see that you are serious and willing to take it further.
Debt collectors are able to fast track collection, saving you time and resources whilst offering additional tools and expertise. From drafting letters of demand for overdue payments through to making calculated follow-up calls, chasing up debt is a drain on resources and time that could be better spent elsewhere – like bringing in new clients and helping the business grow.
Plus, at Professional Collection Services we have no signup fees and only charge commission for debt that is recovered, so your bad debt doesn’t cost more than it needs to. If you’re in need of any debt collection advice, don’t hesitate to get in touch with us so one of our specialists can give you a hand.