The Skills behind Debt Collection – The Case Study
You have some debts owed to you, you’re getting nowhere, and you are slowly losing patience with your customer.
You have made every effort to get your money, but as time goes by, you realise it is not going to be resolved without some sort of intervention. You are not going to write the debt off out of principle, so what do you do? Speak to someone, go on the internet? A lot of businesses don’t really want to speak to another business in case it gets out that they have financial difficulties. It might be a load of rubbish, but they don’t want their reputation tainted.
If you decide to go on the internet, you will find debt collection companies offering a No win, No fee proposal. There is no upfront fee – which is good for you – but why do these fees vary; 8%, 10%, 15%, 20%? The rates vary dependant on the age, complexity and value of the debt. Also, because you do not know what they will actually be doing for this fee, you think it is too expensive.
I want to show you why you should pursue outstanding debts, and the advantages of using a professional debt collection agency.
I am also going to share with you one of my recent cases to give you a better insight into the actual work undertaken by debt collectors.
80% – 92% of your money is better than 100% of zero
Too many business owners do not see the sound business sense in this statement. Instead, they simply think of the cost of employing a debt collection agency, and not what they are getting in return for a no win, no fee proposal. Writing off a debt has no advantage over recouping 80 – 92% of the actual money owed.
The old adage – “You get what you pay for”
A good debt collection agency will employ all of its skills to recoup your debts for you, giving you your time back to concentrate on your business, AND you pay nothing to the debt collector unless they collect all, or the majority of the money you are owed. (One addendum may be that you will need to take the matter to court, therefore incurring legal fees – but your Debt Collection Agency will only advise this course of action if appropriate, and will always outline the fees clearly for you, before you proceed.)
A good debt collection agency will offer you the opportunity to improve the cash flow that directly supports your business – you can also expect expert advice, guidance and honesty.
Unfortunately many business owners turn down the assistance of reputable debt collection agencies, hoping to find a ‘less expensive’ agency. There will always be someone who says they can do it cheaper….but at what cost to you and your business?
It can all too often prove to be false economy, very stressful and not successful in recouping outstanding debts. Many have upfront fees or extra charges, and will simply wait a number of months, and then close the case. Others will not go the distance to pursue your money, as it is not lucrative enough for them, or they simply do not have the necessary skills. I have heard of all of these things happening, way too often.
Businesses who choose to go directly to a solicitor, will find that they are charged by the hour.
Investing in a good Debt Collector
I have been in the Finance and Credit Management / Debt Collection Industry for over twenty years and I am very skilled at what I do.
I work on both simple and complicated debt recovery cases, both here in the UK and Internationally – my scope for supporting businesses and individuals is not limited by geography. All cases need thorough investigation, and that takes time, a clear strategy and a methodical approach. The methods I use save both my client and myself, time and money.
To help you better understand the intricacies of debt collection, and give you an insight into the work and input required for a positive outcome, I would like to share with you a case which I have just completed.
I cannot – and would not – give you my client’s real name, but it is completely factual, and believe me, he is extremely happy with the work that was carried out on his behalf.
So let’s take a look at this case study.
A Debt Collection Case Study
I was called by Steve on the 25th April 2016. He explained that he had financed a garage for their expansion plans, to the tune of £35,000. He would receive a return on his investment, with a monthly capital and interest fee being paid back over a period of years.
This loan agreement was signed and agreed by both parties on the 11th November 2008 – the contract was not only covered by the garage, a limited company, but also by a guarantor – the owner.
Statute of Limitations did not impact on this agreement because there was dialog right up until 17th February 2014.
I had a long chat with Steve, told him what I needed to make an assessment of the case as to whether it was worthwhile for me to get involved on a No win, No fee proposal. He completely understood, and explained to me that his solicitor had drawn up the contract. He agreed to pass me the contract and all the details I needed. I did ask him why he didn’t use his solicitor, and he informed me his costs were too high and he was not that confident in his abilities to collect the outstanding money.
So before I even agreed to take on this case, I had to spend some time evaluating whether it was feasible. Who is going to pay me to do this? No-one – that is part of my business environment, as it would be if someone produces a quote for you.
Within a couple of weeks Steve got back to me with all the details I needed to make an assessment. As I had explained to Steve, the more relevant information I have at my disposal, the higher the probability of collecting what was owed to him. It is also important to note that this was for Steve’s benefit, not mine. If he had not provided me with clear information, I would not have even considered taking on his case, and his time would have been wasted.
I do not take on cases where I think I am going to lose.
Past this point is where my business differs from most other types of business. I offer my services on a no win, no fee basis. There are exceptions to this rule, and in some cases an agreed fixed fee is put forward to help keep costs down.
The Evaluation Phase
Having studied the details, contracts, emails, the statement of events and all the correspondence relating to this matter, I agreed to take on Steve’s case. I now had a better understanding, and I had a clear plan in mind.
Via a conference call, Steve and I discussed the finer details and I was able to quiz him concerning certain aspects of the contract. I will admit that the contract did cover the salient points, but I felt that the wording on the interest payment clauses were obscure, and the length of the contract in place was a ridiculous 10 years.
One other point to make here is that the borrower and the guarantor were in fact the same person, but the contract stipulated that if the debt fell to the guarantor, then no interest would need to be paid. I could not believe my eyes, and I have highlighted this as a cautionary note. Thankfully though, the contract was at least signed and dated.
It is also important to highlight that Steve had received sporadic payments of approximately £10,000 in total, still leaving interest and £25,000 capital, because after November 2008, the debtor went quiet and Steve could not find him.
I strongly suggested to Steve that various levels of tracing should be carried out. I could not see the point of moving this case further until we had something to go on, and to establish that the debtor actually had funds to start the retrieval process.
I have the partnerships in place to assist me in facilitating tracing. Steve fully understood my rationale, took my advice and agreed to a one-off payment to my associates. Without delay we started all of these processes to gather all the information we could.
As a result we discovered that the debtor was going through an insolvency practitioner, and an IVA (Individual Voluntary Arrangement) proposal had been put forward. I also learned that my client was not on the IVA. His name and the amount he was owed had been left off. Funny that.
As you can see, a lot of work had already gone in to this matter, and I am sure you can see the importance of this evaluation phase.
The cost of being indecisive
If Steve had hesitated, he would have lost out on ever getting any money. The Insolvency Practitioner had already begun to ascertain how to split the debtor’s funds of £87,000 to the creditors presented.
Because of ongoing close contact with Steve, and his swift agreement, I was able to arrange an urgent meeting with the Insolvency Practitioner in order to supply him with the relevant documentation, proving that my client had a legal right to be part of the IVA arrangement.
As I fully briefed Steve, the IVA process is very long and can be fraught with delays and even issues which can result in everyone losing out.
Thankfully Steve trusted me and all the work I had done on his behalf, and was prepared to be patient.
Remember all Steve has paid for so far is the tracing, and nothing more, yet I have already secured his place on the IVA Register. At this stage we did not know how much money Steve would get, because other creditors were involved and were expecting a share of the pot.
Meanwhile, with Steve’s permission, we contacted the Solicitor who had written the original contract because, as I have explained, some of the clauses were very unclear. Once I had the necessary clarity, I was able to discuss this in detail with the Insolvency Practitioner.
It then transpired that the solicitor was of the opinion that there was an additional claim of “negligence” to be brought against the Insolvency Practitioner. To instigate proceedings, he wanted £1,000 to pass it to his resolution team. From there the case would be time-based for costs.
I advised my client that under no circumstances should he to agree to this avenue of proceedings. There would be no limit to the costs and no guarantee of success. Also, any associated costs to get to a litigation point may not be taken into account when agreeing a final figure. This meant that Steve could actually end up being out of pocket.
Fortunately I had a sensible client, and he declined the solicitor’s proposal.
Over the next few months I liaised with the IP to negotiate for a higher pence in the pound settlement figure.
As you can now see, this case was very complicated and required both a strong knowledge base and a full understanding of the events and the processes to reach any resolution.
So, from the 26th April 2016 up until now (9 Months) it has taken me many hours of work, skill and tenacity.
I can now confirm that my client will receive £0.59 pence in the pound.
That is £20,300.49
Believe me he is extremely happy with the result, because he thought nothing would come of it and he would end up getting nothing.
I work extremely hard for my clients. Some of my clients have been with me for over 8 years – from when I first started this business – and my largest client has a turnover of £300m.
These long-term clients trust my judgement, and know how important their reputation is to me, as is my own.
Admittedly, it is not always plain sailing, and not every case has such a positive outcome as Steve’s, but I always do my utmost to support my clients throughout the process.
Steve was obviously thrilled with his outcome, but above all he recognised my vast skill and experience, honesty and willingness to go that extra mile.
Any good debt collector worth their salt wants to nurture long-term business relationships, and I firmly believe that by offering no win, no fee proposals, I am reducing the risk for my clients.