Debt Recovery: Do you have problems collecting debts?

 

No one enjoys going to court, particularly over debt recovery. If the debt you’re owed totals more than £5,000, it can take anything up to two years to reclaim it. If it is more than £25,000, you will have to pay thousands of pounds, and wait months, just to get time in the High Court.

Debt recovery is often confused with debt collection, and whilst they both involve the chasing of unpaid debts, the difference is who is chasing the debt. Debt recovery is usually the process taken once the creditor has contacted the debtor several times but has been unsuccessful in recovering the debts. The creditor then enlists the help of a third party to recoup the outstanding balance from the debtor on their behalf.

The issue of debt recovery is arguably more important now than ever before which now makes the UK one of the worst in Europe in terms of unpaid bills. However, when it comes to collecting debts, you must tread carefully or risk damaging your brand and customer relationships, so it is well worth exploring all avenues to reach the best method of debt recovery for your business.

In-House

A lot of the time when faced with a problem involving unpaid debts the initial response is to go straight to a specialist for help. However, before going to the expense of hiring an external specialist, try using your own in-house resources to attempt a peaceful recovery.

By being knowledgeable about the steps you can take to recover your debts in-house, you can eliminate the cost of hiring a specialist and boost your chances of success. There are several quick, easy steps you can take such as knowing your rights, being punctual in issuing letters, using experienced staff to ring debtors, and, if possible, hiring a seasoned credit controller to oversee the process. The most successful debt chasers are those with a rigorous management strategy in place.

Using Solicitors

There will be times when the friendly approach does not work, and you will be forced to take on external help. In this scenario, it can be helpful to discuss your case with a solicitor who’s experienced in debt recovery and can advise you appropriately. For a fee, your solicitor can send a letter to the debtor, demanding payment, and take the case further if this is not successful. With the threat of legal action to be taken should payments not be made; a solicitor’s letter can produce quick results.

Nevertheless, the downside of using a solicitor is likely to result in the destruction of future business opportunities with that particular customer. By using a solicitor, it clearly shows intent.

Mediation

There is of course a slightly softer approach than resorting to a solicitor and you may care to hire a professional mediator who specialises in bringing disputants together and agreeing an amicable compromise. Generally, the mediator offers initial consultation to establish the background and rules of engagement, before arranging a meeting between all parties, at a neutral venue, and trying to work out a mutually agreeable solution. The court will expect you to have tried to solve the dispute through mediation before taking legal action in court. Overall, mediation can be quicker, cheaper and less stressful than going to court. However be warned, hiring a mediator is more expensive than a solicitor sending out a letter.

High Costs

Fees can reach £1,500. If the debt is, say £20,000 debt then it is with involving a mediator, but if the debt is around £2,000 then obviously not.

Debt Collection Agency

If you are thinking more in terms of hiring a Debt Collection Agency to deal with the debt on your behalf, it is worth taking care. Theoretically debt recovery firms should be the most effective of all. After all, collecting debts is their bread and butter and they should have both the resources and expertise to focus on the problem and resolve it speedily and effectively. However, be warned that the reality can be very different.

At Irwin Insolvency, with over 25 years of experience, we’ll ensure you get the best guidance. Contact us today by calling 0800 009 3173 or send an email to mail@irwinuk.net and we will happily assist.

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About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency, rescue and turnaround.