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 eight to ten per cent for commercial debts (and three 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).