Debt recovery and debt collection can often be mistaken for one of the same things, with only one word differentiating the two.
And, if we look at these two elements at the surface level, debt collection and recovery both aim to recoup outstanding money/invoices that have gone unpaid.
However, there are differences between collections and recovery (with the main difference being who is chasing the outstanding payment).
As a professional debt recovery agency, we specialise in both collections and recovery. Acting as an extension of your credit function, working with robust processes and procedures that come into effect the moment an invoice becomes overdue or alternatively, we can provide a debt recovery service that is second to none—providing recovery services when you need them most. Services that are cost-effective and tailored to your business and situation to ensure the most successful outcome for all parties.
In this post, we take a closer look at the differences between collections and recovery, what each activity entails, and the benefits each can bring to your business.
Debt recovery vs. debt collection
The word collection focuses on fetching something, and typically, debt collection is where overdue invoices and late payments are collected in-house.
When a debtor has missed a payment or failed to pay an invoice by the due date, your in-house debt collection process and credit control procedures will commence.
There are various collection methods at your disposal such as phone calls, letters, and emails all chasing the debtor to inform and remind them that monies are now overdue.
Debt collection services often have a much quicker turnaround, with standard debt collection letters requesting payment in 7 days. These payment demand letters are often the first step in collecting outstanding payments.
For larger businesses, specific departments or individuals will be responsible for chasing these debts, following company-prescribed processes and credit control procedures.
However, if you receive no payment from letters or phone calls, the next step in the collection process comes into effect, which is recovery.
Note: If you’re working with a debt collection agency, you must ensure that the DCA can enter into negotiations on your behalf, communicating with the debtor and helping to move things to a satisfactory conclusion.
When we look at the term recovery, we think about getting something back, i.e. retrieving something from someone.
Debt recovery is where outstanding invoices and debts are outsourced to third-party specialists.
The debt recovery specialist will act on behalf of the creditor, using their skills and knowledge of the best debt recovery techniques to chase and recoup outstanding invoices.
All debt recovery practices must comply with debt guidelines and legislation, and full compliance with these protocols must be demonstrable (it is vital that all guidance and regulations are followed; make sure to check out our latest post on Debtor Rights to find out more).
Debt recovery must show that you have provided all relevant information necessary, and you have complete records of all communications and attempts at contact.
Debt recovery aims to receive a willingness to settle any outstanding debts without the need for court proceedings. However, if, after a set period of time, there is still no success or acknowledgement from the debtor regarding the debt, court action can be sought, and your chosen debt collection agency can help provide further information and guidance in this area.
Debt recovery and collection in three simple steps
We make working with us as simple and straightforward as possible.
Step 1 – you can instruct us via email or online HERE.
Step 2 – our agents get to work, professionally chasing debtors on your behalf.
Step 3 – successful collection. We get results and the outstanding money to you in days.
Debt collection services
When working with new customers, we advise you to always check credit scores and run credit history checks on individuals and businesses; this helps safeguard your cash flow and agree on specific credit terms you feel comfortable offering.
It is also vital that you have a credit control process that highlights collection methods to be undertaken in-house, and when to refer to a debt collection agency for recovery.
For debtors, if you do miss an invoice due date, please don’t ignore contact from a debt collection agency; this will only make the situation worse and cause a lot of stress and anxiety for all involved.
At Direct Route, we understand that no late payments and overdue invoices are the same, and we know that how you approach each situation varies, which is why we tailor our professional collection and recovery solutions to your business needs and the situation.
Our recovery service is efficient and effective, with our teams having robust processes in place, and all debt recovery agents following set guidelines to ensure transparency and full compliance.