Debt Recovery

2. Debt Collectors

Debt-collection agencies (and solicitors who specialise in debt collection) have the time, expertise and resources needed for the job.

2.1 Using a reputable debt-collection agency (or a specialist debt recovery solicitor) is a fast method of recovering debts.

• Your customer will often pay up straight away, either in full or in instalments.

2.2 Using an agency is often sensible when you want to keep the customer.

• You are unlikely to keep a customer who has been pursued through the courts.

2.3 Costs are normally calculated as a percentage of the money recovered.

• The commission on the money recovered is typically 8 to 10 per cent for commercial debts (and 3 to 15 per cent for consumer collections), but it can vary depending on the size and age of the debt.
• The percentage commission may be higher for a one-off recovery than if you use the agency for all your unpaid debts.
• Some agencies charge an annual subscription (often £25 to £100).
• Some agencies charge a flat fee in the form of vouchers. You buy, say, £400-worth of vouchers, which you send in with each invoice to be collected.
• If you are asked to pay any money in advance, check the agency's record (see 2.5). Rip-offs can, and do, happen.

2.4 The agency can also instruct solicitors on your behalf if a customer still refuses to pay.

• This will save you time but it may be cheaper to instruct the solicitor direct.

2.5 Make checks before using an agency.

• Is it registered with the Credit Services Association (0191 286 5656)?
• What methods does it use?You could be liable if it uses unlawful methods such as harassment.

2.6 Your solicitors, or your accountants, may be able to recommend a good agency or may offer debt collection services themselves.

• Unless your solicitor specialises in debt collection, this may be expensive.
• The Law Society's Lawyers For Your Business scheme offers free, specialist advice to small businesses (www.lawsociety.org.uk/choosingandusing/helpyourbusiness/foryourbusiness.law).