Pros and Cons of Outsourcing Debt Collection.

Friday 24 Jul, 2009

I run a small contract cleaning business turning over about £1m and I am spending hours collecting money from clients. What are the pros and cons of outsourcing debt collection?

Essentially, you have several options. You could outsource some or all of your debt collection to a specialist agency like Daniels Silverman, employ an in-house credit controller, or ask your bank to part-pay invoices as you issue them (discount invoicing), which can boost cash flow immediately. Deciding the best route (which is often a combination) depends on the nature of your business, your terms of trade and why your clients are delaying payment.

If you outsource debt collection, it is essential that the agency fully understands your business and the contracts in place. You will probably need to provide copies of related invoices so the agency has the necessary proof to chase hard for payment.

If you provide any goods, give copies of signed delivery notes to the agency.

A specialist debt collection firm like Daniels Silverman is experienced in dealing with problem customers and distancing this aspect of business from your staff who deal with customers each day may be beneficial.

Before handing over debt collection, consider which customers probably would pay more quickly if pressure is applied. You could, for example, just outsource older debts.

If poor cash flow is your problem, invoice discounting or debt factoring may help, a specialist like Daniels Silverman can often help advise.