What Exactly Is Debt Collection, And How Does It Work?

The world of debt collection can be a confusing place, with lots of jargon and legal lingo to try and wade through. But underneath it all, the idea of debt collection is really pretty simple. It’s all about ensuring you get the money owed to you, and that you prevent any late paying customers from missing their deadlines again. There may be a lot of ways to do that, but that’s the basics of it. Today, we wanted to go through some of the basics of debt collection, along with some helpful tips for you to use.

Defining Debt Collection

Let’s start right back at the basics. Debt collection is defined as:

“The process of pursuing payments of debts owed by individuals or businesses.”

This definition is quite vague, and could cover businesses pursuing debts on their own, or using an agency to do it for them. And it’s true – many businesses do choose to collect debts themselves, rather than outsource the process. The idea has its upsides and downsides, depending on the size and frequency of the debts, the business and the time involved. But many business owners prefer to use a debt collection agency to assist them – allowing them to outsource the collections and get back to generating income. Most collection agencies will operate as agents of the creditor and collect debts for a fee, or a percentage of the total amount owed.

Working With A Debt Collector

If you’re looking at hiring a professional debt collector to help with your business, you probably want to know a bit about how the process works first. In general, you will meet with your debt collector and discuss what the issues you’re having are. They will listen and advise you on the best course of action (which isn’t always to use them!). If they think they can help, then they will take on the role of debt collection for you within your business.

You then send them the details of accounts you need collecting on as and when they come up. The collectors will use their years of experience to create a strategy for collection, and move through various steps to contact the client, discover the reason for the late payment and collect money owed. Most debt collectors are careful to stay true to your brand and culture, preserving relationships with your customers while still collecting the debt and keeping you in control. Once the money has been recovered, you will receive an invoice for their fee – unless you are on a retained debt collection package – as this will vary depending on the company you use.

What Can A Debt Collector Do?

At the bottom line, a debt collector’s job is to recover money owed to you by customers you have delivered a product or service to. That’s it. But often a debt collection company will offer other services as well – things that compliment the efforts of debt collection and can improve your business as well. For example, some of the services we offer at Debtcol include:

• One-Off Debt Recovery: When you’ve delivered, and your customer is messing you around. Assessing and recovering the debt you are owed in a timely manner.
• Multiple Debt Recovery: Working with your business on a long-term basis to not only collect multiple overdue payments, but put processes in place to ensure the risk of future late payments is reduced.
• Outsourced Credit Services: Running credit control services for your business, so you can benefit from prompt payments and improved cash flow, as well as ensuring all documents are legal and served the right way
• Business Investigation & Analysis: Running checks on the financial health of your clients, helping you make better decisions about the companies you work with, and informing the debt recovery process.

At Debtcol, we work with business owners who want to protect their cash flow and keep their business running smoothly. Not only can we help collect debts that are already overdue, but we can help you put policies and procedures in place to ensure it doesn’t happen again. Our experts can also work with you to conduct business investigation and analysis on new clients, so that you can be sure every customer you take on has the ability and intention to pay, and there are no red flags in their history. If you would like to know more, just get in touch with the team today.