In the present recession, cash flow for organisations may be an issue, in that if they are owed money for work or sales they will have to consider their next steps on Debt collection. Do they take it on by talking to the debtor company or do they employ the services of a solicitor to chase the debtor for payment. A Debt collection agency could offer curiously tempting deals such as no win no fee, but such agencies may assume that merely a minor payment from the creditor is a win and so charge their fee, which may be calculated on the whole debt. Not all Debt collection agencies would do business in this way, but would their web sites expose this level of detail and so give the creditor the information to make an informed decision? The other option is to perform the Debt collection in house by making use of a Debt collection package, comprising Debt collection software and Debt collection letters. Such packages can be purchased from under £50 and businesses who sell these packages would be expected to be able to give full details of what is included and maybe also some idea of the time required to operate the application for a typical Debt collection process. The costs for a solicitor or a Debt collection agency are likely to be on a sliding scale and would typically be based on the debt value, although a solicitor may charge a set fee for the first letter, any further Debt collection letters may be an additional cost perhaps.
When operating Debt collection software packages both the creditor and the Debt collection software should know about the Late Payment of Commercial Debts (Interest) Act 2002, which was originally set up in November 1998 and amended in August 2002. This law allows a creditor to claim both a one-off charge and also interest charges as soon as an account becomes overdue. If the creditor has not referred to this act in the original contract with the debtor, there is nothing stopping them from applying the aforesaid charges. However it may bring in some complaint from the debtor to be suddenly faced with a higher invoice and this may bring in problems should the creditor later apply for a new contract with the debtor firm. To try and save this from coming about it would be best for a creditor that didn’t refer to the legislation to contact the debtor either by phone or by personal visit and courteously tell them that the invoice is late and they would not wish to have to apply the charges that they are entitled to do by the legislation.
If this fails to stir the debtor into payment, then the creditor will need to use the Debt collection software in earnest and write Debt collection letters, which should already be contained in the Debt collection software as templates, ready to use after the debtor details are entered into the database. The creditor should be able to alter the Debt collection letters text to suit their situation or relationship with the debtor, but they must resist using emotional language as this will show them in an unprofessional light with the debtor. By using this strategy it is hoped that the debtor will be persuaded to settle the invoice and also settle up on time in the future.
