What is the smallest debt a collection agency can chase

What is the smallest value a collection agency can chase?

This question is similar to “How long is a piece of string?” in that there is no finite amount, but there are considerations to bear in mind when outsourcing overdue invoices and seeking small debt recovery.

As commercial debt collectors, we’re often asked about the minimum invoice value that an agency can chase.

Our response…

…you have to consider the value of the debt in terms of monetary and relationship.

Collection agency minimum amount

Generally, there is no minimum amount or minimum value, and professional debt collection agencies can chase (successfully) outstanding debts ranging from as low as £200 up to tens of thousands of pounds.

Typically, it is up to you and your business model to decide if you want to pass the debt over for professional collection.

You have to weigh up the pros and cons.

For example, in some cases, it may not be financially viable for you or the debt collector if the value is so low.

However, if these smaller amounts support most of your cash flow and business’s financial position, then it is worth pursuing. It can also be a matter of principle. You don’t want people to think you’re a walkover or that you’re quite capable and ok with writing off low-value commercial debt. In fact, you must also consider the risk of reputation writing off debt, especially in the eyes of your other PAYING customers.

This is where professional debt collectors can help.

We’re often asked, “What is the minimum amount I can pay a debt collector?” We advise you to always speak to your chosen collection agency and find out what fees they charge and how long the collection process can take. Finding out as much information as possible regarding adding late payment charges and interest, etc, can be vital in determining if the debt is worth pursuing.

Minimum amount for collections

Look to assess how important the debt and the debtor are to your business, considering:

Effect on turnover – if you rely on multiple low-value orders that make up the majority of your revenue, then debts, no matter how small, can’t be written off or ignored. Instead, you must implement robust credit control policies and procedures to ensure invoices are paid on time, every time. Even ignoring or not chasing the smallest percentage of overdue invoices can seriously affect your cash flow and the financial position of your business.

Effect on reputation – why write off one debt and not another? Who wins when it comes to which invoices you chase and which ones you write off? What are the criteria? Could you be seen as a soft touch writing off small debts? It’s not a great show of professionalism, especially when some customers pay consistently and then find out that others don’t and get away with it. Creating little to no value for your business, your reputation can be severely affected by poor credit control practices.

Is this customer a one-off or a regular? – when you write off a commercial debt, this often means never working with that customer again, which is fine if this is what you want. However, if you have an ongoing relationship with your customers and rely on them to make regular purchases, you may need to take a different tact. This involves finding out what is going on and why the invoice is outstanding. Are they experiencing temporary cash flow problems? Could they be set up on a payment plan for the short term? In this instance, chasing the debt rather than writing it off could be the best solution.

Can you recover collection costs – even the smallest outstanding invoice may be worth pursuing, especially when you have a right to charge interest as well as add recovery costs to all outstanding invoices. Late payment of commercial debts is a significant element for businesses, and we would advise all businesses to include this in their terms and conditions, making your customers aware of the consequences of late or no payment.

Information for debtors

If you receive communication from a collection agency about an overdue invoice or outstanding debt, please don’t ignore it.

Instead, check that you owe the outstanding amount and that all of the information is correct, and communicate with the debt collection agency as soon as possible.

After the debt is paid, collection stops, and the case is closed.

The aim is to prevent the debt from getting out of control and, in some instances, leading to CCJs and Third-Party Debt Orders (make sure to check out our post relating to what these are and how they work).

Minimum amount for debt collection

Ultimately, every debt collection agency sets its own minimum invoice value for collection. Often basing their decision on the amount outstanding, age of the debt, feasibility of collecting the debt, and the specific policies of the organisation and the collection agency.

To avoid late payments having a detrimental effect on your business, be proactive, manage your credit processes, follow through on all policies, include stringent terms and conditions, and work with a professional debt collection agency.

At Direct Route, we work with you to find the most appropriate solution for you and your business. Helping to weigh up the benefits, our team is on hand to provide exceptional support when it comes to chasing outstanding invoices on your behalf.

Providing you with a regular collection service or as a one-off collection solution for outstanding debts, we have a strategy and successful track record.

Call us today on +447860197476 and see how we can help you.