Debt collection agencies and debt collection lawyers help businesses recover debts, typically unpaid invoices, when companies find that their customers are not paying.
Debt collection agencies and lawyers often have a positive and efficient approach to the debt collection process - but when should a company use a debt collection agency and when can it handle debt collection itself? What does the debt collection law say? And what is our recommendation as a debt collection company.
In this post, we'll focus on this topic to hopefully help you understand when your business can benefit from a debt collection agency.
What does the debt collection law say?
As a business owner, you can, in principle, send your unpaid cases to a debt collection agency as soon as you realize that a debt is in default; typically when the payment deadline has passed.
Typically, a debt collection company can help you send out reminder letters, impose reminder fees and so on, so you don't have to do anything else yourself.
The actual debt collection process can only be started once a so-called debt collection letter, also known as a debt collection notice, has been sent to the customer. You can prepare and send this letter yourself or have a debt collection agency do it for you.
What can I do as a trader myself?
As a creditor, you are generally allowed to carry out debt collection 100% yourself, often called 'self-collection'.
If you choose to handle your debt collection yourself and have opted out of using a debt collection agency, you should be aware that you MUST comply with a large number of formalities. Among other things, you must send a properly prepared and legally required debt collection letter / debt collection notice before the debt collection process can be initiated, as well as comply with statutory deadlines for the letters.
There is basically nothing that you as a creditor can do that a debt collection company cannot do - however, the debt collection company has a number of advantages. For example, they can report debtors to RKI, Debitorlisten and other debt registers - and can go all the way from the first reminder letter to the enforcement court - without you having to do anything.
Most debt collection companies, including Collectia, provide no-cure-no-pay, where we only make money from your case once we are successful in recovering money from your customer.
When should I use a debt collection agency?
It basically depends a lot on your business, the size of your cases, the number of unpaid invoices and, last but not least, your own temperament.
Next, you need to make sure that you find a debt collection company that can and will actually help you; unfortunately, not all debt collection companies can and will handle very small customers. Many often set requirements for the amount of money and the amount of cases you get in a year. However, this is not the case with Collectia.
We help everyone, from the local florist on the corner - to some of Denmark's largest corporations.
When the dialog is lost
Many people, especially small businesses, choose to use a debt collection agency when the dialog with the customer is lost.
There can be many reasons why a dialog breaks down, but often it happens because the customer cannot manage to continue the dialog with the creditor about payment, setting up an installment plan or something else. They often choose to ignore the creditor and their problems.
We often see that when a 3rd independent party, in the form of a debt collection company, approaches the customer, it will have a good effect. The customer will feel obliged to engage with the debt collection company to find a solution - either by paying the full amount or agreeing on an installment plan.
When your company has many cases
Does your company have several debt collection cases in a year and find that your customers need 1, 2 or even 3 reminders before they pay? Then a debt collection company can be a great idea. If your company has many debt collection cases and/or bad payers, it's a good idea to outsource the collection work to a debt collection company. This frees up time and resources for the bookkeeper, who can now focus on more important tasks that add more value to the business. Time is money and invoice follow-up is often a real 'time waster'.
When cases are of a certain size
We often see that many people choose to handle small cases themselves - while perhaps larger debt collection cases are sent to a lawyer or debt collection company.
It's not a bad idea either, because it often adds more process to a case - and has a different effect on the customer.
We can help regardless of size or quantity
No matter how many debt collection cases you have, and no matter their size - all cases are welcome at Collectia.
Because we've made debt collection easier than ever before - it's all done online. You can sign up, create, track and close your cases online - just upload your unpaid invoice and we'll do the rest.