When a small organisation is faced with an unpaid invoice for work done or items furnished to a larger company, the small organisation will have to find out how to carry out this debt collection procedure in the best economical way. This means both in financial terms and in employee time used on the debt collection. In the main there are 3 viable options that are worth thinking about for a small organisation; take on the services of a solicitor, take on a debt collection agency, or buy a package of debt collection software and do the job in-house.
The small organisation 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 organisation that has gone into administration, the small organisation may only get a part of the debt, if anything at all. If the small organisation knows about the larger organisation then the solicitor may have some expertise in this area and might be able to advise them about what their chances are and also say how much it will cost them if it is a viable action. They should also be able to give good estimates on fees for debt collection from a larger organisation that is still in operation. They may charge for the set of debt collection letters, or just per letter, which is something the small organisation would need to understand.
The debt collection agency may be a more difficult choice because, unless the small organisation knows some debt collection firms, or knows other people who do, the choice of ethical one can be difficult. In this case a good place to start may be Business Link, who may well be aware of any local debt collection firms who work in ethical and professional ways when approaching a debtor on the creditor’s behalf. This is crucial because any activity that is unethical may well be harmful to the creditor and could give them a bad reputation with the business community. The charges for a debt collection agency are possibly taken as a percentage of the total debt owed and may have expenses added on top of this. Some may offer a no win – no fee deal, but it is unlikely that such a debt collection agency would not win, and it depends on what is classified as a win; part payment, no matter how small could be a win, but it would be most likely that the charges would indeed be based on the total debt.
The choice of Debt collection software depends on what the small organisation wants; some may come as a comprehensive package, such as with pre defined templates for the debt collection letters and a database to store the details of every debt that the small organisation has to deal with. Simpler offerings may have less, but it would be best to opt for one that as a minimum includes the debt collection letters templates. By using the debt collection software option, the small organisation would have full control of the debt collection procedure and be able to write Debt collection letters. To get the best out of the debt collection software the creditor would need to dedicate some effort to its usage, possibly make it a part of an existing employee’s job. For this in-house option the serious thing is to understand how the debt collection option works, what legislation is available to aid a creditor and how to write debt collection letters that are effective in getting the debtor to pay up. This option has a significant cost benefit in that any solicitor or debt collection agency 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 agency will require the minimum of involvement from the small organisation and bring their skill to bear, but will cost pro rata for the time they have taken to carry the debt collection on behalf of the small organisation. 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 risk of failure because the debt collection option may well be a learning curve.
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Thankyou for posting this information, this is a very informative and comprehensive look at the issues involved in debt collection for a small company.