What are my options when a debt becomes overdue?

What are my options when a debt becomes overdue?

Once an invoice becomes overdue, the likelihood of successfully collecting that invoices decreases the older that debt becomes.

Almost a third (31%) of SMEs have experienced late payments costing their business at least £10,000 in the last 12 months according to research released by Hitachi Capital UK recently. More worrying are the figures released by the Federation of Small Businesses (FSB) which states that 50,000 smaller firms go under every year due to late-paying clients. The FSB estimate that the cost to the economy in the UK is as much as £2.5 billion.

What options do businesses have when their invoices aren’t paid on time and become debt?

Options for Debt Collection

Once an invoice becomes overdue, the likelihood of successfully collecting that invoices decreases the older that debt becomes.

Almost a third (31%) of SMEs have experienced late payments costing their business at least £10,000 in the last 12 months according to research released by Hitachi Capital UK recently. More worrying are the figures released by the Federation of Small Businesses (FSB) which states that 50,000 smaller firms go under every year due to late-paying clients. The FSB estimate that the cost to the economy in the UK is as much as £2.5 billion.

What options do businesses have when their invoices aren’t paid on time and become debt?

DIY Option

There are lots of businesses that have in-house credit control teams and because of this it can be very tempting to continue chasing the customer for the money yourself. Your team will already understand the relationship you have with those clients and therefore be able to protect and maintain it. You will also be able to get instant updates from your team so you know where you are financially and can accurately forecast your cash flow.

However, chasing the debt and recovering the money can become a very time-consuming process that uses up valuable resources that may be more effectively deployed elsewhere in the business. Worrying about, and chasing, old debts could also mean that newer, more recent debts aren’t given the time and attention they need and they too drift into the ‘difficult to collect’ territory.

If the business is smaller, the credit control staff may well have multiple roles to play within the company, meaning that they are unable to allocate sufficient time to recovering the money. An employee is a fixed cost and not every business can afford to have them dedicated just to this role.

Outsourcing Option

If you don’t have an in-house team or have exhausted that as a possibility or you’re simply stuck to know what to do next, then outsourcing the collection is an option.

Established and reputable agencies are experts at recovering outstanding invoices. They will have the time and expertise that you may not have available within your company to recover the money on your behalf.  More and more businesses are now outsourcing this part of their business having seen the benefits using a professional brings.

The cost of outsourcing can be offset against the risk that the money is not collected at all as well as the time you free up by having someone else perform the service for you.

Having the debt collected on your behalf needn’t be an expensive process, some companies charge a flat fee based on the number of invoices to be collected as opposed to a commission on the debt recovered. A good recovery agency will also offer same day services and have an excellent line of communication for you so you will always know where your accounts are up to, giving you the confidence to plan effectively.

Outsourcing your collection can feel like a very daunting step for a lot of companies, however, choosing an established and reputable agency to partner with can really improve your business. A good agency will take time to understand your business and your clients and do all they can to protect your reputation as well as your established client relationships.

Legal Option

This is really the last resort to recover money due to the time and cost involved. If there is no other option and all other avenues have been exhausted, then legal proceedings may be the only way forward to recover your money.

We would advise that you take advice before proceeding and see if there is another route, possibly through mediation or arbitration. A good collection agency will have a pro-active legal team who will be able to look at your case and be open and honest with you about what is happening and the best way to move forward to ensure payment. You should never be left confused with jargon and small print or left in the dark to discover hidden costs.

If you are struggling to find the time to effectively recover your late payments or debts or need advice on how to proceed with a particularly stubborn client, then Daniels Silverman can help. We are a family owned collection agency who put our clients, and their reputations, first.

We have expertly and ethically trained debt collectors who can work alongside your business to bring you cost-effective and timely results.

If you’d like to know more, please do get in touch. You can contact us via our website where we have friendly staff waiting to answer your questions, or you can call the office to talk directly to one of our advisors.