Refer Aging Debts to a Debt Recovery Agency

As part of your Credit Policy you should have an escalating process for chasing up late payments. If your customer does not have a valid query and does not respond to your Final Demand letter then you have two options :

• Continue to chase and consider legal action. You could issue a Letter Before Action (or statutory Demand if the debt is greater than £750).
• Refer the debt to a Debt Recovery Agency / Debt Collection Company.

It's a fact that once a third party is involved in pursuing an overdue debt, the debtor pays faster. It emphasises to your debtors that your business will not tolerate the abuse of your payment terms and shows that you have no intention of writing off the debt.

If you refer your debt to an agency promptly then they should be able to collect the full invoice value for you without charge as they will charge your debtor a late payment fee and interest. Make sure that you investigate the market well before choosing a Debt Collection Service. Most services operate on a no-win no-fee basis but low rates may mean that the Agency does little more than send out standard letters followed by suggested legal action by their solictors at your expense. Ensure that your chose agency has a good track record and that they are likely to put full effort into negotiating your payment without resorting to legal process if possible.

Some rules before referring your debt :

• Ensure that all contact details for your debtor are correct before referring your debt.
• You should know what kind of entity your debtor is, i.e. limited company, sole trader, partnership and provide full details to the agency including registered number.
• Check whether the customer has any queries against the invoice.
• Include a record of your collection activity to date.
• See how TAK Debt Recovery can collect your outstanding debt.