Having difficulties recovering money owed by clients and customers is nothing new for businesses in Australia. In fact, it’s a tale as old as time. 

When a business operates on a credit model – where they provide their services or goods, prior to receiving a payment or a full payment, from their client – it is vital that that business has a robust accounts receivable process in place. 

And while it’s a vital piece of the puzzle, unfortunately, having a strong process in this area is less common than you may think. Businesses can have difficulties managing their accounts and delinquent clients for various reasons – it could be due to inexperience in running a business, it could be because they have been lucky enough to avoid the issue for a long enough time to not realise they may need a process to collect outstanding payments, or it could simply be that their delinquent customers are incredibly difficult to deal with. 

Whatever the reason, recovering this debt and improving your accounts and debt collection processes are two of your biggest priorities now. 

So, how can you recover the outstanding money? Well, if you’ve found this article, chances are that you’ve exhausted your usual methods for collecting payments and you’re looking for some back up. When it comes to professional services to help with debt collection, you essentially have two options – working with a debt collection agency or a debt recovery lawyer. 

Today, we’re going to tell you a little bit about working with these types of debt recovery services and what you need to consider when choosing who to work with. 

But first, here are some things to think about. 

Before hiring a debt recovery professional, ask yourself these questions

We mentioned earlier that there are so many reasons that your customers may not be paying you. Regardless of the reason, it can be highly disruptive to your ability to run your business. So, working with a professional to help recover your debt can help to lift the burden from you.

Before you do hire a professional, it’s a good idea to think about the following things:

Do you regularly have delinquent customers?

If this is your first delinquent customer, it might be a one off, but it is something you should be prepared for. If it is the first outstanding payment you’re trying to recover, then you might need to review your processes. 

If this happens regularly, why? Do you have poor processes in place when it comes to invoicing, payments, reminders, and communication? Are you not proactive enough in your debt collection approach?

Do you vet your customers? How much do you really know about them before making a deal with them? This is particularly important for very high value services and goods, or if you want an ongoing relationship with them. 

It might also be a good idea to look at your payment options and the terms and conditions arrangement you have. You might be making it more difficult than it needs to be to pay or your terms surrounding payments might be difficult to understand. 

Is the debt worth chasing?

While we understand that you probably want to recover any outstanding debts, you do need to take the size of the debt into consideration. Some professional services might have a minimum amount that the debt must be before they will recover it. In some situations, it might be better to cut your losses and move on. 

What kind of debt recovery professional can you work with?

As we touched on earlier, when it comes to debt recovery efforts and professional services, you have two options – working with a debt collection agency or a debt recovery lawyer. Here’s a break down of what you could expect from working with each of them. 

Debt collection agency

A debt collection agency is a business who specialises in recovering debts for individuals and/or businesses. Some debt collectors may offer other services, such as credit management and credit reporting. However, their main focus is recovering the bad debts that are owed to their clients. 

Debt collectors used to have a bit of a bad reputation, where people saw them as menacing figures who bullied people in paying their debts, but this couldn’t be further from the truth. 

A debt collector and their debt collection agency are required to adhere to very strict rules and laws, and act very professionally while doing so. Whilst their focus is on recovering the money for their client, they are also problem solvers, and can often work closely with the delinquent customer to actually find a solution where they can actually pay the debt realistically. 

Being able to focus solely on this service means that a debt collector can develop knowledge and expertise and apply this to each case they work on. They also have access to various systems and software that people who do not work in debt collection do not. 

While many of the processes of a debt collector are probably somewhat similar to the collection processes you might practice in your business, debt collectors tend to have a higher collection success rate as they are often taken more seriously and they have years of expertise to know how to handle many different kinds of situations. 

Debt collection agencies might specialise in a particular industry or area, for example, some debt collectors only work with small businesses. 

Many debt collectors offer their services on a “no recovery, no fee” basis, so if they are unsuccessful at recovering your debt, you won’t need to pay them. If they are successful, then most often you will pay them a percentage of the recovered money – which is usually a small percentage. Some debt collection agencies might offer their services on a subscription basis, where if you pay a monthly or annual fee, you can recover any number of debts, and pay a smaller percentage of the recovery fee for each debt recovered. 

Debt Recovery Lawyer

Many lawyers are experienced in debt recovery, with some even specialising in it. A debt recovery lawyer can advise you on a number of things regarding your debt, including whether you should pursue the matter via the courts. 

A debt recovery lawyer may provide letters in an attempt to encourage your delinquent client to pay, and this can be effective as many people can be intimidated by lawyers. 

Debt recovery lawyers often charge for their services on an hourly basis, with potentially fixed fee pricing in there too. Some particular services, like providing a letter to demand a payment may have a set price. However, the costs can quickly add up, especially if you’re pursing legal action. 

Businesses may choose to have an in-house lawyer who can cover these sorts of issues as well, but this is usually only in large corporate businesses.  

Which is better? A lawyer or a debt collector?

Well, there are definitely pros of either service. 

Each can be highly effective, given the influence a legal professional or debt collector can have in these situations. 

Both lawyers and debt collectors often offer a free, no obligation consultation, so you could talk to them about your situation where they may be able to advise you which is best. 

We might be a little biased because we are a debt collection agency, but we firmly believe we are the best choice for debt collection. Not only do we have a high success rate, our services are more often a lot more affordable than that of a lawyers. 

If you have a small to medium sized business and customers who owe you money, talk to our experienced debt collectors today. Our team has more than 50 years of debt collection experience and we work with businesses all over Australia, including in Melbourne, Brisbane and Sydney. 

Call us today to find out how we can help you.