Why Debt Recovery vs Legal Recovery
If you have exhausted your avenues, such as reminder emails and phone calls, to retrieve an outstanding business debt to no avail, it’s probably time to take the next step to recover your business debt.
The only ways to move forward after encountering a non-responsive customer or client who does not make payment are to:
- Engage a debt collection agency
- Engage a debt collection lawyer
- Write off the debt as a bad debt
When considering the last option, it is worth noting that debts as low as $500 can still be recovered through a formal debt recovery process with online platforms such as DebtForce. With real time tracking on the progress of your debt collection efforts along with practical solutions to help debtors meet their payments, it isn’t worth writing an unpaid invoice as a bad debt in assumption that the amount isn’t worth the chase. After all, the more you recover the more you will be able to pump back into your business cash flow for growth and operation.
Why choose debt recovery over legal recovery
Debt collection agencies specialize in recovering monies owed. Reputable debt collection agencies work against the stereotype and are instead ethical and professional when recovering a business debt.
With industry knowledge and resources to help recover business debts efficiently and effectively, engaging a debt collection agency is often a smart choice given their experience and successful track records.
There are a number of reason why debt collection companies are good at what they do, such as:
- Access to proven, specialised debt collection resources and infrastructures
- They are often taken more seriously as their business is in debt recovery
- Ability to register unpaid debts against a debtor’s credit file
- Ability to take more serious courses of action should there be a need for it
- Competitive pricing or a No Collection, No Commission scheme
Debt recovery agencies are undoubtedly more cost-effective than engaging a debt collection lawyer who will undertake the legal debt recovery process. Unlike debt recovery agencies, debt collection lawyers do not charge on a commissions basis and will typically charge on an hourly basis with a retainer in place.
To put things into perspective, a simple letter of demand issued by a lawyer can cost anywhere from $50 to $350 or more, without the guarantee that your business debt will be paid.
Engaging a debt collection lawyer will mean that you will be accumulating legal costs to which you may not necessarily be able to recover from the debt owed to you. The debtor may be unable to pay the debt resulting in a filing for bankruptcy or insolvency instead, thus leaving you out of pocket for the legal expense accrued.
This situation can be easily avoided with a debt collection agency given that they often charge on a no collection no commission basis.
Engaging a debt collection lawyer also puts your business not in good light given the negative image associated with legal action. Debt collectors are more receptive than lawyers are when it comes to business.
When should you engage a debt collection lawyer
Where all debt recovery recourse except through legal recovery means has been carried out and the debt still remains unpaid, debt collection agencies will consult the business before turning the matter to a debt collection lawyer.
Depending on the amount of the debt, it may be sensible to engage legal recovery especially when the debt owed is a big sum. Hiring a lawyer can also be strategically beneficial if you need the cash quickly as the fear of legal action often sways debtors to making quick payments.
If you have intentions to take the debtor to court, you may wish to skip engaging a debt collection agency and hire a lawyer instead.
Before engaging a debt collection lawyer or traditional debt recovery agency, why not take control of your business debt collection process instead? With no upfront costs and a full insight into the debt recovery process with real time updates and tracking, DebtForce provides creditors with a logical avenue to recover business debts sensibly. Debtors are also provided practical payment solutions which enable them to meet their payments as agreed by the creditor.
Learn how DebtForce can help your business recover its debts today.