When is debt collection not worthwhile?
The question "is debt collection even worth it" is one of the questions we often hear from new clients who have not used a debt collection agency before.
Because honestly, who hasn't heard a story where a debt collection company or lawyer has failed to collect a debt from a debtor?
That being said, debt collection can pay off for the vast majority of businesses in Denmark who have one or more outstanding debts.
It's important to remember that no two cases are identical. Some cases may look hopeless from the outset - the debtor may be in debt but have the will to pay - while other debtors have neither the will nor the ability. In the latter case, there can be a long road ahead to resolve a debt collection case.
In this article, we focus on situations where debt collection is not worthwhile; and where you as a creditor have little or no chance of getting your money back.
The article also highlights areas where you, as a creditor, can significantly improve your chances of resolving your debt collection cases - making debt collection more successful for you, your debt collection company and your customer.
1. the customer lives abroad
Cases abroad are far from impossible to resolve; but are often more expensive and much slower to resolve than traditional Danish cases of similar amount and scope.
But let's be honest, the success rate is often lower abroad and the further away from Denmark we move, the harder it gets.
Talk to your debt collection company about debt collection abroad and the chances for your particular case - many debt collection companies have skilled local partners who may specialize in a particular type of case like yours.
2. You have bad, little or no information on the customer
Unfortunately, we very often find that our client has poor, little or no information on their customer. If this is the case, it can be difficult, even impossible to solve a case. For example, if you only have a full name but no address, CPR or phone number and the name is generic - your chances of getting your money back are very low.
We recommend that you talk to your debt collection agency or lawyer anyway - they often have a number of good tools to find people. They often have access to various personal registers that allow them to find additional information about your customer.
3. Customer's financial situation is poor, does not make it impossible, just a slow process
Many debtors are in financial difficulties, which can be the result of many things: poor or wrong priorities, crime, illness, unemployment, etc.
If your customer's finances are poor, your chances of getting the money back quickly are often poor - but the chances of getting the claim paid over time are often good.
Did you know that Collectia has developed our own credit rating tool, Qatchr? With Qatchr you get easy, fast and cheap credit rating of your customers. This way, you are better equipped to steer around the customers who have a bad economy.
4. The older the case - the smaller your chances
The law is clear: after three years, your claim becomes time-barred for ordinary invoice claims - i.e. claims where you have sent a customer an invoice for work done or services provided.
In principle, as a creditor, you can continue debt collection until the case becomes time-barred. However, reality and all experience shows that the older a case gets - the smaller your chance of getting paid. Significantly so.
There are many reasons for this: the customer's financial situation may have deteriorated, the customer may have forgotten about the claim, or the customer may have died or gone bankrupt in the meantime.
Therefore, make sure you send your cases to a debt collection agency or lawyer well in advance - before the statute of limitations expires. This greatly improves your chances of a successful outcome.
5. The right debt collection company - or debt collection lawyer - makes a difference
As with so many other things, the debt collection company or lawyer you choose to handle your case is crucial for a successful debt collection process.
Success can be measured in many ways, but the ultimate goal is of course that your debt collection partner resolves your case. But how important is it to you, for example, that you can follow the progress of your case on an ongoing basis? That your costs are low? That your debt collection provider has many years of experience in solving debt collection cases?
Collectia has more than 150 years of experience in debt collection
At Collectia, we have more than 150 years of professional experience in debt collection and combined with the use of the latest new technologies, it makes Collectia one of the Nordic region's leading debt collection companies when it comes to professional recovery of debt collection cases.
At Collectia you get easy, fast and cheap access to debt collection; where you simply upload your unpaid invoices on our online platform. We do the rest for you.
