Many businesses will understand the feeling, only too well, of frustration and anxiety when customers become late payers or, even worse, refuse to pay.
Companies of all sizes depend on regular cash flow to keep their business running.
However, when invoices become overdue, this can put everything at risk.
These situations can be difficult and frustrating, especially if you don’t have robust collection strategies and procedures in place.
But what is the best and most appropriate way to encourage debtors to pay?
You do, of course, have the option of chasing outstanding and overdue invoices in-house. However, due to the time and resource this can take up, many businesses opt to instruct a specialist debt collection agency like Direct Route.
Whichever route you choose, the goal remains – successfully receive payment on all invoices, with money recovered on all outstanding invoices as quickly as possible.
There are pros and cons of using both in-house and external approaches to debt recovery, and knowing these and what’s involved can help you make the most informed and appropriate decision for your business.
Inhouse collections vs. outsourcing debt recovery
What is your credit control process in-house? A set of emails, telephone calls? Do you outsource overdue invoices at a set stage of the process?
There is a lot to credit control, and having the right processes and procedures in place from the start can help to avoid a lot of problems and confusion in the long run.
You need to ensure that you and your team know about late payment charges and additional interest that you can add to overdue invoices to encourage prompt payment. Teams will also require training on dealing with demanding customers and understand what to do when customers have “gone away.”
We would also advise building into practices, what is known as a cut-off point. The point that is appropriate for you and your business is to outsource the debt. You can only pursue a debt for so long before it becomes more detrimental to you and your business.
Due to most professional debt recovery agencies operating on a commission-based pricing model, you often have nothing to lose and a clear invoice to gain when outsourcing your collections. Making outsourcing your overdue invoices a cost-effective and time-saving solution.
Inhouse collections
As soon as an invoice becomes overdue, collecting in-house can often be seen as the most effective, quickest, and cheapest response.
And yes, in some instances, this quick-fire approach from experienced credit teams can work.
However, when that call isn’t taken, or the debtor is still refusing to pay, who is the matter then escalated to? Is there someone on hand to take a different approach? Who does your credit control team have for additional support?
Also, for those self-employed, not only do you not have the time or the resources to chase overdue payments but collecting outstanding debt continually might not be something you’re most comfortable with.
In addition, you must understand the regulations and guidance surrounding what you can and cannot do to collect the debt. Failure to understand the legalities of debt collection will only land you in hot water.
Now, recovering the debt independently can become more expensive.
Learning the best ways to recover a range of debts from very different debtors takes time and skill.
In addition, if you’re caught up chasing outstanding debts, who is left running the business and generating further sales and income?
You also have relationships with your customers, and in some cases, independently collecting a debt can negatively impact this relationship, as emotions can be run high, and it can often be awkward for both parties to confront.
Maintaining good working relationships is the key to continued business.
Outsourcing commercial debt
Outsourcing commercial debt is now a more common practice than ever before.
This is because a commercial collection agency can enforce the debt much more effectively and efficiently. Working with your customers politely and professionally and maintaining working relationships going forward. You can carry on with the day-to-day running of your business, with peace of mind that your collections are in good hands. Providing you with time to focus on growing other areas of your business and increasing your income further.
Professional debt recovery agents also know the law surrounding debt collection and have tried and tested techniques gained from years of experience and knowledge to successfully collect outstanding invoices.
Contacting a professional collection expert sooner rather than later is the most beneficial option, increasing your chances of successful collection two-fold.
The expert and professional team at Direct Route has been helping businesses with debt recovery solutions for many years. With our high successful collection rates, matched with our exceptional customer service, why not call us today on 0330 229 1991 to find out how we can help you.
We are a specialist debt collection agency focusing on commercial debt collection, using effective collection processes that ensure success and that all matters are dealt with professionally and appropriately.
We have helped hundreds of businesses recover thousands of pounds worth of unpaid debt.
Helping to recover money that is owed, working across all industry sectors – Direct Route.
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