Debt Collection Mythbusting

It’s an unfortunate fact of business that sooner or later you will encounter a customer who cannot pay for the goods and services you’ve provided. No matter what industry you’re in or how reliable your customers have been in the past, collecting an outstanding debt is something most businesses will need to take care of.

When you rely on customers to pay invoices in a timely manner, bad debts are more than an inconvenience, and chasing those debts can be time-consuming. Hiring a debt collection agency is one of the best ways to get around the hassle of collecting money you’re owed, but there are many common misconceptions that discourage people from outsourcing their collections. In this article we’ll take a look at the most common debt collecting myths and whether or not they’re true.

Myth One: Debt Collection is Only for Large Corporations

Many people believe that debt collection is reserved for large businesses who need to follow up on unpaid debts like phone bills and car loans, but many commercial debt collection agencies specialise in small to medium-sized businesses. Since companies of any size can be left holding a bad debt, it’s usually simple to outsource your debt to an agency.

Myth Two: My Debt is Too Small

Collection companies deal with debts of all shapes and sizes and many will accept one-off debts of a few hundred dollars.

While some large companies have in-house debt collection teams, smaller businesses and those without dedicated resources often find themselves chasing small debts on their own. When following up debts becomes a regular occurrence business owners can find themselves dedicated valuable time to try to contact clients. Debt collection agencies offer ongoing consultancy services to help you recover regularly occurring debts more cost-effectively.

Myth Three: I Will Lose My Client

This is not true.

Everyone you work with understands that goods and services are traded for something of equal value and that unpaid invoices can be seriously damaging to businesses of any size. Using a debt collection agency leaves your hands free to continue operating as usual while we follow up with your client. This allows you to separate debt activities from ongoing business with the client and maintain the best possible relationship.

A good debt collection agency is effective and works ethically, ensuring customers are treated well and giving you both the chance to continue working together.

Myth Four: My Debt is Too Old

Australia has a statute of limitations on debt collection, but most states allow businesses to collect a debt up to 6 years after it was incurred.

The exact length of time depends on where you live and the nature of the contract. In Queensland, a 6-year limitation applies in most cases, however that period may restart if the debt is acknowledged in writing or payments are made against it. Debts secured by a mortgage (such as a home or car loan) are subject to a 12-year statute of limitations.

Newer debts are far more likely to be recovered than older ones, so retrieving the money you’re owed is easiest when debts are only a few weeks or months old.

Please contact us if you have an older debt you would like to collect. Our team can provide advice on whether the debt is still eligible for collection.

Myth Five: Debt Collectors are Too Expensive

Debt collectors can be expensive if you contract the wrong company. Make sure to do your research and read the fine print about how your collection agency makes its money. Many collectors will take a commission of the total debt value or what is recovered, but the exact amount varies and other fees may be involved (annual fees, admin fees, etc).

If you are careful to define the terms of your contract with your customer then your debtor may be legally compelled to cover the cost of any debt collection activities you take. Whatever you do, forming a good relationship with your debt collection agency is the best way to invest in recovering the money you’re owed. Please feel free to get in touch with Dynamic Commercial Collections at any time. Our experienced Debt Consulting Services team has the advice and resources, such as field services, to help you recover outstanding debts while saving your business time and money.