What's better in house credit control or outsourced credit control

I’m often asked what is the best type of credit control, is it better to increase the size of a companies credit control department, or would it be best to outsource the task to a third party.

For me the best will always be to keep credit control in-house and working with a third party for those cases that slip over. I hope the following helps you make your mind up.

Years ago companies no matter how large or small they were always had at least 1 dedicated credit controller and even then they would often need additional help. Now days in the age of 1 man bands, the owner has to also chase overdue accounts. So the first thing that has be decided is can you appoint a person to handle your credit control. If you can then much will depend on how many accounts that person will be chasing, what else will they be doing? If you take the 70 – 30 rule as a guide in other words out of 100 account clients, 30 will be late & generally of these 8-10 will still be overdue at the end of the following month.

If this is your scenario and you can’t afford to bring in another credit controller you may wish to outsource the overdue accounts to an independent agency.

How does this work, is usually the next question I’m asked. Like everything else with debt collection and credit control setting out the collection parameters is vital, during this period you will need to decide if the agency is to be your credit control department or acting on behalf of the agency. Either way you should be able to dictate that your client pays you directly. You will also need to agree a reporting system is it real time or daily, weekly or monthly. The agency will need to know how they will receive the information, will you be providing copies of invoices or supplying the details in an excel spreadsheet or via a CRM or SAP system. Cost will depend on how the agency wants to be paid some will agree on a flat fee others on a % of the total ledger and some will work for a % of monies collected. The choice will need to be decided as there is no standard fee structure.

For more information please visit our website: www.deanemcollections.co.uk

As a Debtologist I’m often asked:

"What’s the point of Bankruptcy?"

When someone owes more than £750 bankruptcy action can be considered as an option, likewise if a company owes the money you can issue a winding up notice. The pro’s & con’s make interesting reading and the reasons behind taking or not taking action should be considered along with the consequences.

The first thing that should be realised is that taking the ultimate action against your debtor is that bankruptcy/winding up does not mean you will receive any money and all that you may actually achieve is satisfaction.

Before you take any legal action consider consider both the positive and negative results of your actions. The positive side is that by taking action you may collect the money you are owed. The negative is that you may not. More important it could cost many thousands of pounds to stop your debtor owing money to any other business.

So how do you make someone bankrupt or in the case of a business issue a Winding Up notice. Well it is relatively simple and it is something a debt collection agency can do or you can do yourself, in fact a court officer would be able to help you fill in the forms. The first thing you should do, once all possibility of settlement has been exhausted is write to your debtor giving them a final warning that unless they settle you will take legal action against them. Provided that the debt is not disputed and they owe more than £750 then action can be started.

Regardless of the status of the debtor (company or individual) a Statutory Demand has to be issued. Once issued, the defendant will have 21 days to respond or you can start either the bankruptcy procedures or Wind-Up the company.

When writing to a company notify them that a Winding-Up notice would be issued pursuant to section 122(1) (F) of The Insolvency Act, 1986, due to the company’s inability to pay its debts as they fall due.

However, you should be aware that by issuing a Statutory Demand you are leaving yourself open to a myriad of possible implications and costs as well as disappointment. The first thing you should be aware of is if your debtor is based in a different area of the country and the debtor issues a defence, the case will be heard in the defendants nearest court. Secondly, if your debtor issues a defence or disputes the debt, you will need to a) answer any defence & b) attend the appointed court, even if the debtor doesn’t.

So far this action is no different from issuing a County Court Summons. However there are some differences, the first is you pay for a summons prior to it being served. In the case of a Statutory Demand you are entitled to issue the Demand but you will only have to pay if the debtor enters a dispute. The fees for all legal actions are given out on the HM Courts website. As I have pointed out, winning a court case does not mean that your debtor will be declared Bankrupt or Wound-Up as they will still be able to appeal to have any decision set aside. If you are still determined to take action, the forms are available from www.hmcourts-service.gov.uk. My advice would be before taking any legal action take advice from either a debt collector or lawyer.

For further information please visit our website: www.deanemcollections.co.uk