Outsource your debt collection or not?

If you send out several invoices each month, you know better than anyone that managing your accounts receivable is a time-consuming and labour-intensive process. There is a chance that some of your invoices will not be paid on time. Particularly when your organisation is experiencing significant growth, there is a risk that accounts receivable management will not receive the attention it deserves and requires. The result? This puts considerable pressure on a company’s cash flow. Outsourcing your debt collection can be a sensible choice and a solution to the problem. To what extent is this advisable, and how do you go about it? These are questions we’d like to answer in this blog.

Outsourcing debt collection: what can you handle yourself, and what’s better to outsource?

When outsourcing debt collection, a legitimate question is what you can handle yourself and which part you should outsource to a debt collection agency. It is common for the initial stage of accounts receivable management to be carried out by the company itself. Once several reminders have been sent, it may be sensible to transfer the claim to a debt collection agency. A debt collection agency will attempt to recover the debt through both amicable and legal means. If we stick to the division of roles outlined above, the company itself will handle the reminder invoice, the second reminder, the final demand and telephone contact.

A company should certainly not underestimate these tasks, as they form a key part of building up the case file. This file is important should it become necessary to proceed with legal debt recovery proceedings. When proceeding with legal debt recovery proceedings, it is important to consider whether it is worth organising this within your own company.

Particularly if your company is experiencing significant growth, it is worth considering whether you actually want to handle the legal debt recovery process yourself. This aspect of debt recovery can easily be outsourced to a debt collection agency. An external party will then take care of accounts receivable management on your behalf, operating under your organisation’s name. As a result, the customer is unaware that they are dealing with an external party. Outsourcing debt collection to an external party has the advantage that your company can manage accounts receivable more flexibly. The external agency can easily scale up or down. Furthermore, the level of expertise within a debt collection agency will be many times greater than within your own company.

Avoid debt recovery proceedings with a credit check

It’s no fun having to chase up your money. It’s therefore worth considering how you can avoid debt recovery proceedings. An important first step is to assess the companies you do business with. A credit check, accompanied by a credit report, is a good first step in this regard. Carrying out a credit check gives you an insight into your customer’s financial situation. Are they even able to pay their invoices? If this turns out not to be the case, you can make alternative arrangements with this customer regarding payment terms. For example, by requiring an advance payment. This eliminates part of the risk straight away. Whether you organise the initial stages of accounts receivable management yourself or outsource the entire process, one thing is certain: ensure that accounts receivable management has a clear role within the company. In addition, appoint someone to be responsible for the results and for managing accounts receivable. All these tips help minimise the likelihood that you will need to engage a debt collection agency.

Outsourcing debt collection

Would you prefer to outsource debt collection? Or better still: prevent a debt collection process altogether by carrying out a credit check or obtaining a credit report? Creditchecken offers a solution in both cases. When clients see no further options for recovering an outstanding payment, they call on us. To this end, we work with a reliable partner who specialises in debt collection processes.

The aim is always to recover the amount without going to court – and in most cases we succeed: no less than 92 per cent of cases are successfully resolved through amicable settlement.