In the vast majority of situations the first action that a creditor ought to do when an invoice is not settled after the accepted credit period is to contact the debtor, by way of a telephone call, personal visit or non-threatening letter. If any of these approaches do not make the debtor pay the bill then the creditor will have to consider what action to take next. If the creditor has suffered late settlement of accounts in the past they may well have developed a method for handling it and so would probably just go ahead and take that course of action. If however, this is the first time, or maybe they had been unsuccessful in previous debt collection situations, they would be advised to investigate their strategy.

These essentially boil down to three; engage the services of a solicitor, or a debt collection agency and thirdly, look around for some debt collection software and take on the job themselves. There are pros and cons to each choice, with the solicitor the creditor is paying for experience, especially if the solicitor specialises in commercial debt collection, when they may be able to get settlement quickly. Their charges may be for the total number of debt collection letters, or maybe a percentage of the debt on collection.

The debt collection agency may be more difficult to choose unless they have local offices, otherwise it means a search on the Internet and then either opt for based on web site information, or after contact with them. What would not be so easy to judge is how professional they are when approaching a debtor on the creditor’s behalf, since any activity that is confrontational may well reflect on the creditor and might give them a bad name with the business community. It is hoped that such bad debt collection organisations are few and far between, but if possible the creditor should try and find previous clients of the Debt collection agency and see what they say. The costs for a debt collection agency are possibly worked out as a percentage of the total debt owed and possibly have expenses in addition to this. Some may offer a no win – no fee deal, but it is unlikely that such a debt collection agency would not win, and it depends on what is counted as a win; part settlement, no matter how low may be a win, but it would be most likely that the fee would indeed be calculated on the total debt.

The Debt collection software method should allow the creditor to have full control of the debt collection process, write their own Debt collection letters from instructions in the manual or perhaps by using templates that should be included with the debt collection software. To get the best out of the debt collection software the creditor would have to dedicate some resource to its operation, perhaps make it a part of a current employee’s job. For this in-house route the important subject is to understand how the debt collection process works, what legislation is available to help a creditor and how to write debt collection letters that are effective in getting the debtor to settle the account. This method has a worthwhile cost saving in that any solicitor or debt collection agency would charge a fee for every debt collection, whereas the debt collection software is a purchased item and can be reused repeatedly with only minimum outlay, such as postage and printer consumables.

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