6 debt collection myths dispelled
Debt collection agencies can be a fantastic resource in the fight against late payment and bad debt. But unfortunately age-old myths about debt collection services exist, scaring many away from using their services.
Here we tackle 6 debt collection myths and show that, by employing the right debt collection agency, you could still get back what you’re owed.
Myth: It’s expensive
Reality: Most debt collection agencies work on a success-only basis so they will only get paid once they have collected your debt. This will likely be in proportion to what they successfully recover. The price of their services will be minimal compared to the amount you would lose if you had to write the debt off as uncollectable, and the cash flow implications of it remaining outstanding for longer. Additionally, they are often very successful in collecting statutory late payment and interest fees – which can go a long way to covering the costs of collection.
Myth: Customers won’t like it
Reality: A good debt collection agency understands that maintaining your customer relationships is extremely important and will take your brand as seriously as you do. At Hilton-Baird for instance, our preference is polite mediation when it comes to debt collection, just reaffirming their obligation to pay while explaining the adverse impact their tardiness will have on our client. Although it is true that some might not like the fact you’ve instructed a debt collection agency, you’ve only done so because they haven’t paid you in the first place. You’re perfectly within your rights to do what you can to get what’s rightfully yours, while it’s also worth considering how valuable a customer they are if they aren’t going to pay.
Myth: It’s only for big companies
Reality: Thousands of small businesses refer their debts to collection agencies every day because they recognise that chasing late payment is not their expertise and a third party is likely to have better results. When you only have a small team it’s unlikely you’ll have the time or resources to chase late payment without having to neglect key business tasks, but by fully outsourcing your credit control, you could free up time to concentrate on your business and still get paid.
- How to identify the best debt collection agencies
- What does a debt collection agency ‘actually’ bring?
- When should my business consider using a debt collection agency?
Myth: It’s only for really old debts
Reality: Research shows that the earlier a debt is referred, the more likely it is to be collected. So instead of wasting valuable time chasing debt for months on end in-house, why not hand it over and see if a debt collection agency has better results? You can even set up an ongoing debt collection facility where the agency will take on any debt which reaches a certain age. This helps to maximise their recovery and remove the time and resource burden on your business.
Myth: A solicitor is more effective
Reality: The truth is that although the legal system can be useful, it can be very costly and time consuming. A good debt collection agency will prioritise recovering the unpaid sums by working your customer, preserving your valuable relationship, before taking the legal avenue, and have the expertise to do so when the time is right.
Myth: It will damage my brand
Reality: The key is finding a debt collection agency that will respect your brand as much as you do. Also, by introducing a debt collection agency as part of your normal credit control process, you can ensure the agency complements your in-house collection efforts while using their expertise to help you get paid sooner.