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Legal Collections - 5 Reasons to use a Law Firm to collect your bad debts

January 9, 2015
Debt Collection

Of course! I hear you say, they are going to have at least 5 very good reasons for using Solicitors to collect bad debts…they are a Law Firm after all! But, if you have asked yourself “do I need a solicitor to collect my debt?” you probably do. Whilst using a Debt Collection Agency on a ‘pay by result’ basis makes good sense and will recover anything between 1% and 30% dependent on the age of your debts, it won’t recover as much as you’d like, and don’t forget you’re paying a commission so even when a debt is recovered in full you won’t see 100% of it. So do you write it off or do you instruct a Law Firm? 

1. A Solicitors letter often provokes a response from previously silent debtors. This may even negate the need for any next steps because the service you would get from a Debt Collection Agency, exploring affordability, treating customers fairly and identifying vulnerable customers, you will always get from a Law Firm. The same high level of service except that we can go further to recover the debt as we can issue a clear demand that will be precise and factual as to what next steps will be taken. A Debt Collection Agency that does not have in-house Solicitor or outsource to a Law Firm may not make any reference to legal action on their letters. Making them less effective. 

2. Solicitors will conduct a thorough investigation of your debtor’s circumstances. Working the file manually rather through a dialler that rings for 18 seconds and moves to the next debt, a qualified and trained Para- Legal will, work the debt thoroughly attempting all channels of contact have been explored, where appropriate conduct internet searches, try all numbers and seek new ones and use email if known in order to reach your debtor. Once contact is established you have the option of requesting attempts are made to negotiate a payment plan for a reasonable commission rate or else go straight to issue and apply for judgment for an agreed flat fee and court costs allowing you to budget more easily. 

3. A solution to your cash flow problems. Bad debtors have a domino effect on cash flow affecting the way a company trades, especially small businesses that may have to hold a project or reverse a decision because the forecast income hasn’t arrived. As a business you need to unlock this money without spending large sums to do so. The change of brand will Increase your liquidation rates before any legal action is taken, improving your finances, once a judgment is obtained and providing payment is made you will recover anywhere between 75% to 100% of your costs. So worst case scenario your costs to collect are directly comparable with a high volume Collection agency with no legal provisions. 

4. You get a whole lotta knowledge for your fee. Aside from being regulated by the Solicitors’ Regulatory Authority and the Financial Conduct Authority both of which have very stringent rules to adhere to, you gain access to people who have dealt with every conceivable scenario a customer can present. Law Firms with specialised Debt Recovery teams will have Para-Legal’s and Solicitors vastly experienced at dealing with any exceptions to the process and can address any defence made competently and effectively. The majority of cases judgment is entered with no response from the debtor or by admission, you can expect to be contacted and advised as to an appropriate method of enforcement identified previously and costs to allow you to make an informed decision that’s best for your business. You have several methods of recourse to recover what you are owed and what it will cost you to recover it. 

5. Personal Service. If proceedings are commenced a Law Firm will assign your debt to a named contact, someone who is accountable to the Courts and accountable to you the Client. This means you can get updates and ask questions on demand. If I can give you any advice it’s not to let your debt get too old, you should be going through your internal Credit Control as soon as the debt becomes overdue and outsourcing at 90 days whether to a DCA or Law Firm, the longer you wait the less chance you have of collecting it! Make sure your terms of business state you will seek recovery via a third party and include any fees or late payment charges you intend to levy. Point this out to your customers; they will know you are running your business professionally and with purpose. Don’t let sentiment or embarrassment prevent you from doing what’s best for your bottom line. The sooner you broach the matter with your customer, the sooner you’ll know whether you need to consider further action and can act before its too late.

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