Debt Collection Economic Benefits
The Economic Benefits of Debt Collection
There is no doubt that 2020 has been an extremely challenging time for UK business. Many businesses, in addition to wrestling with falling orders, staff furlough and ongoing uncertainty, are facing an avalanche of unpaid invoices. In fact, some figures show that more than 57% of SMEs have experienced difficulties with late payments since the beginning of the COVID-19 pandemic.
A Growing Problem
Unpaid invoices have long been a problem for SMEs in the UK, and there is evidence to suggest that it has been worsening since 2016. The impact of non-payment can be wide-ranging. In many cases, it can restrict growth, and besides the obvious cash-flow implications, non-payment can lead to time-consuming and costly debt-recovery efforts, representing an additional burden.
The COVID-19 pandemic has simply made the problem worse. The lifting of the threat of some legal action as part of the UK government’s series of measures to ease the pressure on businesses has enabled some unscrupulous operators to avoid paying on time, or at all.
The result has been the creation of an acute crisis among SMEs. It is possible that over 700,000 businesses are facing financial difficulties, and the shutting down of County Courts and other avenues of legal redress has led to the build-up of a large invoice backlog. Sitting back and waiting is rarely a good option as one of the principles of effective debt collection is to pursue any debts in a timely fashion, increasing your chances of being at the front of the queue for payment. So, not surprisingly, many businesses are opting to turn to professional debt recovery agencies for help.
How a Debt Collection Agency Helps
Using a debt collection agency is increasingly common throughout UK business, though it is important to make the right choice. When you engage a debt collection agency, they are effectively representing you, so you want to use a professional, forward-thinking agency that will be able to recover your debt without damaging the relationship between your business and your customer. All reputable UK debt collection agencies are part of the Credit Services Association, which is the UK industry’s sole trade association, so that should be your first port of call.
Two Types of Debt
In the UK, debt collection agencies deal with two main types of debt, although these can be further subdivided by industry.
Business debt collection usually involves failed B2B transactions, typically in the case where services or goods have been delivered but have not been paid for. The good news is that there is a strong legal framework for recovering business debts, including the important Late Payments Of Commercial Debts Act. Business debt recovery is an essential factor in the smooth running of many businesses, which is why a professional effective debt collection agency can be a huge asset.
The other principal form of debt collection we get involved with is private debt recovery (except consumer credit), in which individuals owe money, either for services or goods. This type of debt collection includes debts owed to health and public sector organisations, as well as utility suppliers and mail order companies. This type of debt can be harder to secure, so the use of a professional and forward-thinking debt recovery agency is essential.
The Importance of Debt Recovery
It is clear that debt collection agencies have a crucial role to play in the recovery of the UK economy as the full effects of COVID-19 continue to play out. To find out how we can help you recover your debts quickly and effectively, get in touch with us today.