Overdue accounts are an issue that almost all businesses have had to address at some point in time. It is a problem that can badly impact a company for years, mainly when it comes to cash flow. Not to mention, in recent times, it has been noticed that 90% of businesses fail just because of cash flow problems. This is the reason why debt collection is not a luxury, but a requirement, especially for those who want to set their business up for long-term success.
What is Debt Collection and Debt Recovery?
The terms, debt recovery and debt collection may sound the same, there is an inherent difference between these two figures. The debt collection process considers various debt recovery methods. Here, the debtor is approached decently and is asked politely to give the details of the finances he owes. As the process reaches more critical levels, the debtor is warned by different methods. Additionally, debt collection is a strategic process that the creditor deploys to recover consumer credit and loans.
The main difference between debt recovery and debt collection is who is trying to retrieve the debt. Debt recovery is when a loan or a debt goes unpaid for a long time and the creditor hires a third party to collect the outstanding money. It has a direct relation to a debtor’s credit score. So, if a debt recovery service contacts you, it means that you might have defaulted on a loan. It also records specific misconduct which is reported to credit bureaus, because this can ruin your credit score and can majorly impact your future loan opportunities. Therefore, if you can’t collect your debts, you can get a help from a debt collection agency.
Here are some of the reasons that will tell you why it is beneficial to hire a professional debt collection agency in Italy, or some other place for managing your account receivables:
1. Efficient Collection
Debt collection processes can be complex. While some companies and businesses try to handle collections internally, it can be pretty difficult as it requires a lot of time and takes away from tasks that can generate income. Whereas, an agency that specializes in collecting debt has procedures already in place, and is able to achieve successful results with a higher level of efficiency than you or a non-professional could, unless you have an employee dedicated to collections. So, if you hire a debt collector on a contingency basis, you really have nothing to lose at all.
2. Compliance with Regulations
There are certain laws that govern debt collections, and they keep changing. And not being familiar with the law makes you vulnerable to penalties associated with non-compliance. So, it is better to hand over the responsibility to professionals that will comply with laws, and prevent you from having any kind of lawsuit. Also, do not forget to identify a debt collection agency, and to confirm their capabilities to mitigate any risks.
3. Trusted Guidance
Many people might not be aware of the best practices for collecting debt. On the other hand, a debt collection agency can provide you with support and great guidance so that one can avoid wasting time on ineffective practices and strategies. Not to mention, making even a little mistake can end up costing you, which is less likely to happen if you hire a knowledgeable and expert debt collector.
4. Detailed Records
A debt collection agency maintains detailed records and documentation regarding their communications with debtors, which is also an information that can be used as evidence in the future. Also, good record-keeping has several benefits, if you decide to write off debt because that information is essential for tax purposes.
5. Legal Knowledge of Debt Collection
Dealing with the legal matters of debt collection can be pretty tough. Mainly, a decision to litigate the matter requires legal knowledge that you may not have internally. A debt collection agency have the capacity to conduct an investigation to find out the legal stature of the debtor, which will help them in making a decision about ways to move forward without wasting time and money. Basically, they can help you make sound decisions. Which includes factoring in related laws and how a proposed strategy will impact your bottom line.
6. Skip Tracing Capabilities
Debt collectors have various skip tracing tactics that actually work, and they are great at finding people who have not answered to several attempts of contacting them. Though it might seem near impossible to contact a debtor at times, good skip tracing practices are effective at getting them to respond.
So, deciding to use a debt collection agency or not, generally depends on various factors. And the reasons listed above are worthy of consideration regardless of your industry and business size. Because a good debt collection company is a valuable resource that you probably need to have.