The Most Cost Effective Process Of Debt Collection For A Small Organisation.
When a small enterprise is faced with an unpaid bill for work done or products supplied to a larger company, the small enterprise will need to find out how to undertake this debt collection process in the best economical way. This means both in financial terms and in employee time taken on the debt collection. In reality there are 3 useful choices that are worth thinking about for a small enterprise; engage the services of a solicitor, take on a debt collection organisation, or obtain a package of debt collection software and do the job in-house.
The small enterprise should look for a solicitor that knows all about Debt collection, firstly they will know if they can recover the full amount of the debt or not. For example, in the case of a large enterprise that has gone into administration, the small enterprise may only get a part of the debt, if anything at all. If the small enterprise knows about the larger enterprise then the solicitor may have some expertise in this area and could be able to advise them about what their chances are and also say how much it will cost them if it is a worthwhile action. They should also be able to give good estimates on costs for debt collection from a larger enterprise that is still trading. They may charge for the set of debt collection letters, or just per letter, which is something the small enterprise would need to be aware of.
The debt collection organisation may be a harder choice because, unless the small enterprise knows some debt collection businesses, or knows other people who do, the choice of professional one can be difficult. In this case a good place to begin might be Business Link, who may well know about any local debt collection businesses who work in ethical and professional ways when contacting a debtor on the creditor’s behalf. This is crucial because any behaviour that is unprofessional may well reflect on the creditor and could give them a bad name with the business community. The fees for a debt collection organisation are possibly calculated as a percentage of the total debt owed and might have expenses in addition to this. Some might offer a no win – no fee option, but it is unlikely that such a debt collection organisation would not win, and it depends on what is classified as a win; part settlement, no matter how small could be a win, but it would be most likely that the fees would indeed be based on the total debt.
The choice of Debt collection software depends on what the small enterprise wants; some might come as a complete package, such as with ready made templates for the debt collection letters and a database to store the details of every debt that the small enterprise chases. Simpler offerings might have less, but it would be best to choose one that as a minimum comes with the debt collection letters templates. By using the debt collection software option, the small enterprise would have full control of the debt collection activity and be able to write Debt collection letters. To get the best out of the debt collection software the creditor would need to allocate some effort to its operation, possibly make it a part of a current employee’s job. For this internal option the important thing is to recognise how the debt collection path works, what legislation is in place to assist a creditor and how to write debt collection letters that are effective in getting the debtor to settle. This option has a significant cost benefit in that any solicitor or debt collection organisation would charge a fee per debt collection, whereas the debt collection software is a purchased item and can be reused repeatedly with only minimum outlay, such as postage and printer consumables.
There is a trade-off with the three options, a solicitor or debt collection organisation will require the minimum of involvement from the small enterprise and bring their experience to bear, but will cost pro rata for the time they have taken to carry the debt collection on behalf of the small enterprise. The in-house option of debt collection software will be much cheaper but it presents a resource issue for the small company, as well as the danger of failure because the debt collection path may well be a learning curve.
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