It is no secret that being owed money is a stressful and upsetting experience. As well as the feelings of frustration, those that are owed money may have the pressure of being unable to fulfil their financial obligations.
For private individuals, this may mean the difference between putting food on the table or paying the bills. For businesses, it can put an entire enterprise into jeopardy.
In 2020, it was estimated that 4 out of every 5 businesses in the UK had to deal with money issues originating from unpaid debt. It was reported that some business owners needed to use their own money to keep their company operating. In other cases, many had to sell off property or the business had to shut down entirely.
With this in mind, the subject of debt collection must be taken seriously and acted on as soon as possible. However, when confronted with debt, many people are unsure of how they should act.
There are several options available to those that are owed money, and it is important to consider the choices before committing to a course of action. The decision on what method of debt recovery to take is an important one, and choosing poorly could leave you in a worse position than when you started.
Debt Collection Options
Choosing the right debt collection option for you largely depends on your circumstances as well as the debt you are owed. Even though you must act quickly to recover your money, you should spend some time making sure that the choice you make is as beneficial as possible.
Collecting a Debt Independently
For many people and businesses, choosing to perform debt collection alone is perceived as the most cost-effective option. This is understandable, as many people think that they will not have to go to the expense of hiring a third party as they believe they can recover the debt quickly themselves.
In practice, however, recovering a debt independently is often a time consuming and expensive process. As well as the time that is required to recover a debt, the person collecting must learn all of the required expertise to do so. Understanding what can and cannot be done when recovering a debt is essential, and mistakes can be very costly.
In some cases, the debt collection process may go smoothly, but many people eventually come to the point where it is simply not cost-effective to continue to chase the debt. This leads some to either escalate the debt to a professional or write it off completely.
Taking Legal Action
It is common for those that are owed money to take legal action for their case. This involves hiring the services of a debt collection solicitor. They will take the case through the court system and work towards a result that means the debt is recovered.
There are many advantages to this process, and the solicitor you work with will take all the necessary steps required to recover the funds.
However, this service does come at a high cost, and there is no guarantee of success in any court case. It is no secret that solicitors charge a high amount for their services, with some charging an hourly rate of hundreds of pounds. This cost is sometimes enough for people to write off the debt, as the cost of collection overtakes what the debt is worth.
As well as the cost, it is common for court cases to last for many months. The defendant will also seek legal representation, and their defence will lengthen the time required to recover the debt.
These factors should be taken into account when considering legal action against a debtor.
In some cases, it may be preferable to come to an amicable agreement with a debtor. Both private individuals and businesses should consider this option, especially if they value the relationship with the debtor above everything else.
Whilst this method may not be successful in recovering the full amount, it removes the need to take more expensive collection measures.
Hiring a Professional Debt Collection Agency
Instructing the services of a professional debt collection agency is an increasingly popular option for businesses and private individuals to take. In addition to providing an effective and low-cost solution, agencies will take every step possible to end the matter amicably.
Agencies will deliver a completely comprehensive service, and often provide benefits such as 24/7 online access to ongoing cases.
Many specialist agencies exist, and no matter what your circumstances are there will be a solution available. For example, Federal Management is known as the UK’s leader in commercial debt collection solutions.
In contrast, Frontline Collections provide the UK’s best private debt collection services.
Whilst the cost of instructing a debt collection agency is significantly lower than that of the alternatives, an expense is still incurred. This is important to factor in when you are making a decision.