A practical entrepreneur, seeing that the payment is delayed by more than 60 days, should not wait until the company is threatened with the loss of financial liquidity. If he is unable to enforce the outstanding payments on his own, he should consider ordering debt collection.
Before choosing a debt collection agency, we should think about our expectations and devote some time to find the offer that best suits our needs and the specific area of activity. Of course, it is possible to conduct debt collection on one’s own, but, if the company does not have a debt collection department, it should check whether it is cost-effective, analyse the scale of write-offs for overdue receivables, the costs of employees who deal with debt collection and the connected business trips, and the possessed know-how. As debt collection is quite time consuming, it is best not to entrust it to employees of other departments and to seek professional assistance instead.
There are as many types of receivables as there are sectors, so it is extremely important for the agency to know the specific activity of our debtor. Such knowledge should be supported by the relevant experience. We should ensure that the actions of the debt collector bring us tangible benefits. The key element is for the agency not to limit its actions to sending further calls for payment. This is why it is worth asking for letters of reference and, if time is important, to check the operational capacity of the debt collecting agency, so that it does not prove unable to realise our order due to lack of resources. We should devote more time to analysing the offer in terms of the offered scope of services, fee and the structure of the proposed agreement. If the remuneration of the debt collection agency is based on success fee, this guarantees that if the debt collection attempts are unsuccessful, we will not have to bear any additional costs. Additionally, renowned agencies often credit the court entry fees and bear the legal representation costs. Apart from that, they take over the preparation of documentation and representation in court.
One should never forget to verify the information received from the debt collecting agency representative, and when signing the agreement, one should check the scope of co-operation, first of all whether the offered services suit our actual needs. It is important to make sure that the agreement contains the relevant provisions concerning on-site debt collection, which is often only promised by agencies. Proper selection of a debt collection agency often determines whether our enterprise will recover its receivables from its debtors.
Published on: 9 November 2016