Outsourcing your Debt Collection

Are you thinking about outsourcing your debt collection?

At Advance Debt Collection, we believe it is important for you to focus on providing your goods and services, before you focus on debt collection however, it is not always advisable to appoint a debt collection agency.

One reason it is not feasible to hire a debt collection agency is that the debt to be recovered may be less than or too close in value to the eventual fee you will be charged for the debt collection agency.

Additionally, when possible, it is important to tailor your debt collection process to the specific individual who you are seeking to recover funds from.

If you have an existing relationship with the customer, you may first seek to utilise the existing rapport you have with them, to gently remind them that there has been a bill that has become due.

However, some companies and business may be of a size where they are involved in providing services or products to a great variety of people on a daily basis, and consequently the amount of invoices or trade credit agreements that are sent out may potentially become too large, for a builder, for example, to manage.

At this stage, it may make more financial sense to outsourcing your debt collection, accounts receivable, and invoicing processes to a debt collection agency.

In this article, our debt collectors explain the benefits of outsourcing your debt collection.

Outsourcing your debt collection - You are able to focus on proving your goods and services

This is simple, but when you are busy it does sometime pay to have these types of reminders.

Those who provide a product or a service generally wish to focus on that, otherwise you would likely not be working on that. Small business owners especially may find it hard to market, produce your goods and services, and also manage accounts.

While in the infancy stages of your business it may not be feasible to hire accounts professionals, it may be feasible to hire a debt collection agency to assist with collection overdue payments.

At Advance Debt Collection, you don't pay us until you get paid. 

Outsourcing your debt collection - A debt collection agency often has tools and experiences that you don't

In today's day and age many software as a service companies will allow free trials for their software, though not all do.

On top of that, while there may be free trials available for some applications, it will sometimes be the case that it is hard to learn how to use the software within the allowed time.

Another instance may be that paid databases often used by debt collection agencies do not always allow free trials, and so payment of these databases for any period of time may uncommercial.

Further to this, it is often the case that experience can be the missing ingredient when attempting to recover a debt.

At Advance Debt Collection we often advise that it may be a good idea to attempt to recover the debt yourself first, before engaging us or another debt collection agency.

Being emotionally removed can allow for a greater degree of professionalism

When recovering a debt, it is important to remember that there are a variety of reasons that the debtor may have been unable to repay the debt.

When you as the business owner are trying to recover a debt you are owed, as you are providing a service, it can become a lot to deal with, and it can often be the case that relationships can sour as a result of this process.

It is disappointing in the event this happens, as this may ultimately lead to less or on business from this customer.

In many cases those have had invoices outstanding do come back for your products or services again, and so it is important to remain composed and professional when seeking to recover debts, as losing your call in this situation may ultimately end up sending them to another service provider.

It can often be the case that business owners do lose their cool, and so this is one advantage of hiring a debt collection agency, especially one that has experience in what can often be the complicated process of collecting a debt.

Debt collection agencies are usually able to remain neutral and are mandated by law to act in a particular way that is fair to both the creditor and the debtor.

A call from the debt collection agent may inspire the debtor to make payment out of fear of a poor credit report

Many people realise that when they get a call from a debt collection agent, the creditor has started to take the debt seriously.

There are some people who believe that they never have to repay debts, and can evade payment forever without any consequence.

However, when you as a debtor receive a phone call from a debt collection agent, you might be advised by that debt collection agent that if the payment is not made in reasonable time, or if there is a failure to reach an agreement for a payment plan, the debt collection agent may advise the debtor of the fact that in due course there will be a negative credit report made on their credit file.

This is not be used in a threatening way, but it is a very real possibility if the debtor does not repay a legitimate debt they have, that this debt will lead to a negative report on their credit file.

While the debtor may still not want to make that payment, the reminder of their credit file being jeopardised might be enough to make them pay.

Outsourcing your debt collection - Before, on, and after due date reminders

This tip may not be applicable to everyone, but perhaps most applicable to those larger companies who are too busy to keep a close eye on invoice due dates, and whose staff are unable to find the time to send as many reminders as some individual debtors might need.

The debt collection process should start before the debt has become due. In other words, communicate in a professional and respectful manner of upcoming due dates for debts.

This could be in the form of text messages, phone calls, emails, letters, and during certain hours of the day, site / home visits, if this is appropriate.

Hiring a debt collection agency such as Advance Debt Collection will allow you to rest easy knowing that your phone calls and other forms of communication are not going to cause you any issues with the law.

Outsourcing your debt collection if you are not a confrontational person

If you are not a confrontational person, then it is likely the case that you feel uncomfortable by the prospect of having to ask people for money.

Debt Collection is not all about overdue debts, it is more holistically about managing the accounts receivable process.

Advance Debt Collection is able to manage this debt collection process for you, so that you can focus on providing your goods and services.

Debt collection agencies know debt recovery lawyers who can increase your likelihood of being repaid

Ideally, it is everyone's hope that the debt collection agency will be able to secure the recovery of your debt. However, in some instances, it is not possible, and more drastic action does need to be taken.

Once you have attempted to recover the debt with a debt collection agent, it may be advisable to try and collect the debt through legal action.

At Advance Debt Collection we have a legal partnership with a litigation law firm that specialises in debt recovery.

We can assist you in working with these lawyers by passing over important details, which may make the legal processes easier.

The Dos and Don'ts of Debt Collection

Dos and Don'ts of Debt Collection can save a debtor from making a mistake, and enable a creditor to collect their debts. Are you in a situation where debt is a significant part of your life or income? You may be wondering what action to take and what to avoid in these situations.

It is recommended to pursue legal advice specific to your situation, but some basic background knowledge can ensure you get the best result from your debts or the debts you are owed!

What is a Debtor

A debtor, as defined by the English dictionary, is:

“someone who owes money.”

Dos of a Debtor

In relation to the dos and don'ts of debt collection, there are a number of things that you should do if you are a debtor.

Talk to your Creditor

Informing your creditor that you are unable to pay debts in time can result in them taking action to assist you in negotiation, such as extending due dates, creating payment plans, or even lowering your debt.

Creditors will generally have a variety of options for individuals in your exact situation.

An open conversation with your creditor may also avoid them taking legal action against you in the future, as they may be aware of your situation and confident that you will be honest about your finances!

Seek a professional to assist

Depending on your situation, it may be beneficial for you to seek professional help in a business such as a lawyer or financial councillor.

A financial councillor is a professional in assisting those with low income and may offer free services to assist those who cannot afford to pay.

They can help you with topics such as saving and budgeting.

If it fits your needs, a lawyer may be able to assist you in negotiating with your creditor or making you aware of the legal aspects behind debts and debt collection.

Budget

If you are in a situation of low income or high debts, budgeting your finances may be beneficial for you! Budgeting is the process of showing and controlling all income and generally limits money spent unnecessarily.

It is important to budget responsibly and ensure that your essentials are not pushed aside for the purpose of saving money, however! 

Don’ts of a Debtor

In relation to the dos and don'ts of debt collection, there are a number of things that you should NOT do if you are a debtor.

Don’t ignore the problem

Ignoring your debts is unwise and can result in negative impacts down the track! Some make the mistake of ignoring their debts, declining phone calls from creditors, and leaving letters unopened.

This lacks progression and will not make your debts disappear and will likely negatively affect your finances.

If you are actively unable to pay debts, ignoring them is likely to simply irritate your creditors and cause them to be harsher with negotiations or consequences when the inevitable comes.

Don’t borrow more money

Furthermore, it is also unwise to take more money out, to repay debts or otherwise.

This will likely result in an increase in debt and will further damage your financial situation and credit score if you are unable to repay.

It is recommended to refrain from credit card use, as they are a form of debt.

You may want to cancel credit cards if it is appropriate for your situation.

While in debt, you generally want to avoid borrowing money that is unnecessary for your finances.

Don’t miss due dates

If you can avoid it, it is highly recommended to avoid missing due dates while in debt.

Debts will generally come with a late fee, meaning if you miss a payment, you will be required to pay extra to your creditor.

This may result in you entering further debt and payments piling up on you over time.

It is wise to pay your debts on time to the best of your abilities and, if you cannot, have a conversation with your creditor about negotiation options.

What is a Creditor?

As stated by the English dictionary, a creditor is:

“someone who is owed money to.”

Dos of a Creditor

In relation to the dos and don'ts of debt collection, there are a number of things that you should do if you are a creditor.

Be open to negotiation

When pursuing debt recovery, it is generally beneficial to your business to be open to negotiation with your debtor.

Debtors may be unable to pay you back in time and an open negotiation allows them to be clear about their position and for a sustainable plan to be set up to receive the money back you are owed.

This may also benefit your reputation as a business, as you will be viewed as fair and willing to communicate with clients in a civil manner.

Maintain records on clients

Make sure you keep all documents involved in the payment and recovery of debts such as invoices, emails, etc.

This will ensure if matters escalate to court, you have sufficient evidence to prove your debts and ensure your money is returned to you.

Make credit checks

Before entering a debt with a client, ensure you do a sufficient check of their credit and financial history.

This can prevent you from entering into a contract with a client who will be unable or unwilling to repay you the money they borrowed.

Hire a debt collection agency: Some make the error of assuming that taking action on the recovery of debts will be more financially efficient than hiring a debt collection agency.

This is often not the case, as those trained in the debt collection industry can recover your debts more efficiently than simply pursuing debtors yourself.

Furthermore, the investment in funds following up debtors without the guarantee of receiving your debts is always an active risk, a risk decreased by those trained in tactics and methods of recovering your unpaid debts.

Don’ts of a Creditor

In relation to the dos and don'ts of debt collection, there are a number of things that you should NOT do if you are a creditor.

Don’t ignore the problem

It is recommended to avoid waiting on debtors to return debts or not follow up with them when they miss payments.

Although this may be obvious, you as a creditor may have a large corporation or simply a busy schedule and forget or don’t bother following up with debtors when they miss payments.

Studies suggest that the likelihood of you being repaid decreases over time, so it is important you take the time to contact debtors if they miss payments!

Don’t harass or threaten your debtor

It's important as a creditor to remain professional and refrain from harassment or threat when a debtor misses a payment.

Remember to avoid tactics such as repeated calling, taking advantage of your debtor, or using methods of physical threat to receive payments.

Not only is any of these actions damaging to your reputation as a debtor but can result in charges pressed against you in court.

There are laws on creditors in Australia and using any of the above methods can result in punishment!

Don’t attempt to collect debts without knowledge of laws

As aforementioned, debt recovery is a complex process and there are laws and restrictions on the practice.

Before attempting to recover debts, make sure you are aware of the restrictions in Australia.

Violation of these regulations can result in debtors taking legal action against you, so you must be aware of your responsibilities before entering into the process of debt recovery. 

The 5 Advantages of Outsourcing Your Debt Collection

The first and probably most obvious advantage of outsourcing your debt collection to a debt collector is that you will have much more free time.

Something that anyone involved in debt or debt recovery will tell you is that debt collection takes a while.

As a creditor or business owner, chances are you have more than one debt to tend to.

Depending on the size of your business, you may have hundreds of debts that you need to take care of at any given moment.

These debts can all pile up and become a bit too much for anyone to deal with.

Not to mention all of the other areas of your business and tasks that you have to keep up with. Where will you find the time to eat or sleep?

This is a struggle that debt collection can free you from! With debt collection, another party will take complete control of your debts and any collection efforts for you.

This means that you will finally have the time to work on your business, or just have some time to do something else.

You will Obtain Professional Advice

Another great benefit of outsourcing your debt collection to a debt collector is that you will be able to receive some professional advice about how to manage your debt.

Advice from a professional can be expensive.

For some, the costs of getting that advice on top of the costs of the debt collection process (when you do it yourself) can add up and mean that advice is simply not something that you can afford.

Debt collection can cut the costs of collection by allowing you to have your debt collected and receive some advice about how to proceed and such in one go.

Talk about killing two birds with one stone!

Getting that advice can be really crucial to a struggling business and can be the difference between insolvency or financial hardship and thriving as a company!

This advice can direct you with your future collection methods and allow you to find new and improved ways to manage your clients.

As we know, debt collectors have seen it all before and can, therefore, provide you with that much-needed advice from the eyes of a professional.

Outsourcing Your Debt Collection Means Less Legal Risk

Another great benefit of outsourcing your debt collection to a debt collector is that you will have less legal risk involved with the recovery of your debts.

As with many other money-related matters, you will be required to follow several rules and regulations when you are collecting debts from clients.

However, it can be difficult to know each of these regulations by heart and, in your busy life, you can accidentally violate them.

This will have consequences and may even result in you being sued by the debtor and being penalised by the court.

This may mean that you are required to pay your debtor a lot of money that you may or may not have and is bound to damage your reputation as a business and owner.

When you outsource your debt to a debt collector, this risk is significantly decreased.

As professionals in debt collection, debt collectors will generally have a much better understanding of the rules and will make it a key point of their business to follow them.

It is important that you are aware, however, that rules broken by a debt collector will be reflected onto you, both reputation-wise and, more importantly, legally!

Before hiring a debt collection agency, conduct some research.

Outsourcing Your Debt Collection for Improved Cash Flow

Another great benefit of outsourcing your debt collection to a debt collector is that you can improve the cash flow of your business.

Cash flow is an essential element of your business.

The term ‘cash flow’ refers to the money that is both coming in and out of your business and whether or not you are making enough money to get by.

A negative cash flow is when you have more money leaving your business in expenses than you have coming in, which will eventually drive you out of business if it is not fixed.

When you outsource, debt collectors will be able to generally collect your debts with more success and in a better time, which can help you to improve your cash flow!

Better Customer Relationships

Another great benefit of outsourcing your debt collection to a debt collector is that you will be able to build strong professional relationships with your customers much more effectively.

When you outsource your debt, you do two things, you give yourself more time and you leave the ‘dirty work’ of managing money to the professionals.

This way, your clients may like you more as they don’t see you directly having those unpleasant conversations with them.

It also means that you will have the opportunity to improve your customer service with the extra time that you will have!

Outsourcing Your Debt Collection - Key Takeaways

Managing debts can be difficult, especially on top of all of your other responsibilities.

Why not free up some of your time and resources by outsourcing your debt collection?

Debt collectors are professionals that can provide you with far more than just collecting debts.

Say, for example, you have a missing client. They can use a process called skip tracing to locate these individuals!

Consider debt collection today and submit your debt online.

Outsourcing your Debt Collection FAQ

Navigating the complex world of debt collection can be daunting for both businesses and individuals.

Whether you're considering outsourcing your debt collection or just want to understand more about the process, this FAQ section aims to provide clear and concise answers to the most common questions related to the topic.

Dive in to gain insights and make informed decisions about your debt management needs.

Why might it not be advisable to appoint a debt collection agency?

It may not be feasible if the debt to be recovered is less than or too close to the fee charged by the debt collection agency.

How can I approach a customer with whom I have an existing relationship about a due bill?

It's best to utilise the existing rapport and gently remind them of the bill that has become due.

When might it make sense to outsource debt collection?

If the number of invoices or trade credit agreements becomes too large for a business to manage, it may be financially sensible to outsource.

What are the benefits of outsourcing debt collection?

By outsourcing, businesses can focus on their core offerings, take advantage of the tools and experiences of the agency, maintain a professional demeanor in communications, and potentially incentivise payment due to fear of a negative credit report.

What kind of reminders do debt collection agencies provide?

They may send reminders before, on, and after the debt's due date using various communication methods like texts, calls, emails, letters, and sometimes site/home visits.

Why might someone prefer to hire a debt collection agency if they’re not confrontational?

Debt collection agencies manage the process professionally, allowing individuals who are not confrontational to avoid uncomfortable situations.

Do debt collection agencies have connections with legal professionals?

Yes, Advance Debt Collection, for example, has a legal partnership with a litigation law firm that specialises in debt recovery.

How can debtors handle their situation effectively?

Debtors can communicate openly with their creditors, seek professional assistance, and budget their finances.

What mistakes should debtors avoid?

Debtors should not ignore their debts, borrow more money, or miss due dates.

What should creditors do to ensure successful debt collection?

Creditors should be open to negotiation, maintain records, check credit histories before entering agreements, and consider hiring debt collection agencies for efficient recovery.

What actions should creditors avoid in the debt collection process?

Creditors should avoid ignoring the problem, harassing or threatening the debtor, and attempting to collect debts without knowledge of relevant laws.

What is the importance of understanding debt collection dos and don’ts?

Understanding the right actions can optimise debt recovery or repayment and prevent legal issues or damaged relationships.