13
July
2021

4 reasons to avoid debt recovery agencies for collecting late payments

At a time where SMEs have reportedly lost over £126.6 billion to the cost of Covid, value for money is imperative.

Hiatham Javaid | Senior Litigation Executive

By Hiatham Javaid, Senior Litigation Executive

There’s no doubt that businesses around the world have suffered hardship over the past 18 months. For many, cashflow sources dwindled, pipeline customers vanished, and financial plans became worthless as the country entered its first lockdown.

During a period where 40% of SMEs reported delays to payments (increasing to 67% for medium sized businesses), the Government support to help endure the difficult months was certainly welcomed. However, with the pandemic recovery now underway – debt recovery must follow.

This has led many to seek professional advice and expertise with some opting to instruct a debt collection agency. An action in principle that may makes sense… except, the reality is you would you be better served to recover payment by a team of litigation experts specialising in debt recovery.

“Of course you’re going to say that”, I hear you say. But let me explain just why the experience of working with a debt recovery agency isn’t one to be favoured.

  1. No tailored approach

Debt recovery agencies work on quantity rather than quality. Taking on commercial cases involving unpaid invoices where they typically fire generic letters lacking a personal touch in a scatter-gun fashion.

For a portion of the debtors you are chasing, these initial letters may be enough to receive payment but considering that an agency would not be involved unless you had already reached out, it is very unlikely. Instead, it is more common to see the cost of chasing a debt spiraling higher as letter after letter is sent only to fall on deaf ears.

At a time where SMEs have reportedly lost over £126.6 billion to the cost of Covid, value for money is imperative.

  1. The impact on your reputation

Recovering lost income is an art upon itself. On one hand maintaining a steady cashflow relies on regular payment and any unpaid invoices need to be handled with haste. Yet, on the other hand approaching the situation with too much force – particularly at a time where pandemic recovery is still ongoing – can be detrimental to the reputation of your business.

When outsourcing this work to any external company, their actions reflect on your business. If their tactics are deemed to be harassing, it will be your name being dragged through the mud.

With Covid lockdowns and restrictions continuing to ease and what appears to be a clear roadmap to recovery, relationships and reputation remain indispensable to SMEs who should always be mindful of the next bump on the road to success.

  1. Cut out the middleman

In cases where a debtor refuses to make their payments despite involving a collection agency, legal action may be taken. Agencies do not generally offer this provision and attempt to push it to a linked third party, which means further outsourcing the work to a legal firm. Adding more people into the equation, higher costs, and a longer wait for the cashflow boost.

After a tough year, there is fatigue and it is not easy for anyone involved having to chase debts. Understanding the circumstances that many companies have found themselves in, whether being the debtor or the creditor requires a pragmatic approach but the balance in the tricky world of recovery is also key.

Continuity of support and advice you receive, saves time, money and ultimately is more likely to benefit you in the long run. There is clearly a lot to be said for maintaining a firm legal standing from the offset that will undoubtedly help steady the ship.

  1. Go direct with legal recovery experts

Debt recovery agencies vary in quality, style, and ability. There is no industry standard which can leave you feeling unsure on whether they are the best fit. Avoid that uncertainty by engaging directly with licensed legal experts specialising in this area.

Working with a law firm early offers peace of mind that all legal proceedings are being carried out in the correct process with tailored correspondence keeping all parties informed. If or when the case comes before a Court, you have representatives ready and able to fight your corner without the need to outsource as an agency would.

Aside from the legal reinforcement, engaging these specialists also presents a message to your clients. Demonstrating that you can communicate in a professional, law-abiding manner with respect to their circumstance and the process involved.

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There are several steps to recovering unpaid invoices which you could pursue prior to any of these methods. The relationship between a business and its clients represents the lifeblood of success and maintaining that relationship throughout any legal action will help with future business dealings.

If you are in need of legal advice in relation to an outstanding debt, Primas Law possess a team of specialists ready to aid your debt recovery action and a track record of success. Working with all from SMEs to local authorities on commercial law interests, Primas acts proactively with a focus on value for money. To discuss a possible case, seek initial advice, or to just chat about your situation email my directly at hiatham.javaid@primaslaw.co.uk.

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