When should creditors start debt collections? Our answer is that between 50-60 days past due is the best period to get started. Because during this period, businesses should have tried to recover the debt internally, in the event of non-payment, pursue debt collection as soon as possible to ensure a high success rate.
Statistical Data:
According to market research, the debt recovery rate is somewhere between 75% and 85% for high-risk customers with less than 60 days of overdue debt, whereas the recovery rate drops to 55% to 65% for 60+ days debts. There can be as much as 30% difference in debt collection success rates compared to starting collections before or after 60 days overdue.
Other Creditors May Drain Your Debtors’ Cash Flow:
One of the most common reasons for such a large success rate difference is that your debtor(s) owe money not only to your business, but also to other companies. If this is the case, whoever starts debt collections earlier will get paid, whereas creditors starting later will not get payment, or even spend more fees in legal actions and winding up on top of the debt.
Some business owners with legal backgrounds may challenge our opinion that the liquidators may be able to claim back "preference payment". Our answer is that "preference payment" can be avoided to a certain degree and liquidators are only allowed to claim back payments within a certain period (generally half a year), so if creditors start debt recovery early enough, then the payments we received will be out of the scope of "preference payment".
Evidence Is Lost.
Another scenario that we have seen a lot is when there is a dispute, the story from the creditor and the debtor is different. This may be due to either (or both) parties forgetting the whole matter or intentionally disputing something that didn’t exist. Now we need to find evidence from each party and then sort out the whole story. However, creditors have to spend more time on finding that evidence and carry the risk of a weaker negotiating position if they can’t find full evidence.
The Debtor Changed His Or Her Contact Information Without Informing The Creditor
When a business closes or relocates, debtors' addresses change naturally, as do phone numbers and email addresses. Some debtors may intentionally do so to avoid debts, and although we have the ability to find them, it will save you a lot of money if debt collections are started before the contact information is changed.
Xservice Debt Collection provides professional debt collection services on a no win no commission basis, our service cover Melbourne/Victoria, Sydney/New South Wales, Brisbane/Gold Cost/Queensland and Perth/Western Australia. Our debt collectors are familiar with most industries and how businesses run, can handle all types of debts, no matter due to disputes or debtor’s cash flow issue. If your clients are not paying invoices, do not hesitate to give us a call, our debt assessments are obligation-free. Contact us now for an active debt recovery agency.