Unsurprisingly one of the most common questions asked of our sales team is “what are our fees and charges for collecting outstanding debts?” Whilst most businesses only require debt collection services when all their own efforts at retrieving what is owed have been unsuccessful, no-one wants to overpay for a service. Although conversely, it could be asked what is the cost to the business of not collecting your outstanding invoices?
In this article, we will review the key factors regarding debt collection pricing to consider when looking at your ledger, the important questions to ask when hiring a debt collection agency, and the typical pricing structure you can expect. By the end of this read, you’ll have strong understanding of potential costs and be confident in choosing the right debt collection partner.
Factors impacting charges for collecting outstanding debts
The cost of debt recovery can differ greatly depending on the needs and requirements of each individual client. Variables such as volume, value, type, and age of debt will all impact cost of debt recovery and any reputable debt collection agency will take these into consideration within their pricing structure. It is impossible to have a one-size fits all pricing structure because debts come in a multitude of different shapes and sizes.
As a broadscale rule:
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Larger the debt = lower the commission rate.
There are some base line costs to collecting a debt. Whether the debt is valued at £100 or £100,000 someone must have the initial conversations regarding it, upload it onto the system and commence collection activity. The commission rate charged for each debt must cover these costs (and make the business a bit of profit!) so will invariably be higher for a low value debt and lower for a high value debt.
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Younger the debt = lower the commission rate.
The age of a debt has a direct correlation to its collectability – as a debt ages the probability of collecting it decreases. Commission rates generally vary from between 2% for debts placed less than 30 days past due to around 25% for debts more than 360 days past due.
However, there are many other factors which will also come into play such the total volume and value of the ledger placed, the type of debt and the quality of data available. Ultimately a good debt collection agency will offer a commission percentage which ensures they can cover the costs of effectively servicing your account, delivering you the best chance of collecting what is due, whilst making themselves an element of profit. If collection is priced too aggressively, there is potential for your account not to receive the right level of service and for you not to see the results you desire.
Upfront fees and onboarding charges.
Some debt collection agencies may request payment upfront, charge an annual or monthly subscription, administration, onboarding or placement fees. We do not charge these at Barratt, Smith and Brown. We are confident in the success of our debt collection processes and the transparency of our no-win, no-fee, commission only structure of charges for collecting outstanding debts. Any additional charges are therefore unnecessary.
International Debt Recovery Commission Rates
Barratt Smith and Brown specialise in international debt recovery delivering our clients services across the globe. Our extensive expertise in the area enables us to offer our clients a consistent debt collection commission rate wherever their debts are located – so whether we are serving one office in one territory or multiple offices in multiple markets, all parts of the business will pay the same price and receive the same high-quality service.
Conclusion
Cash collection is like downhill skiing– it starts with high velocity at due date and, then gently slides to a halt over time.
Unless you have activity to push payment, whether in the credit-control, debt recovery or at the end of the line, legal services stage, payments will invariably decline. Debt collection will come at a cost to your business, no one can afford to deliver a service for nothing, but it is important to balance this against the cost of not securing payment at all. The right debt collection partner will offer a pricing structure which enables them to effectively service your ledger, optimising your chance of getting paid, whilst being fair and competitive within the marketplace. Key questions to ask are:
- What are you commission charges?
- Are there any onboarding fees?
- What level of service will you deliver for the fees?
- What will be the collection process on my ledger? How often and in what form will interventions take place?
- What is your process for managing disputes?
- How do we agree targets – and what is the process if these aren’t delivered?
Getting a holistic picture of what you are purchasing is critical to understanding the value of any costs and ensuring you find the right partner to ensure you meet your cash collection targets and secure the long-term financial health of your business.
If you have an unresolved debt which you would like help collecting, contact the BSB sales team today at business@thebsbco.com or 0116 2182045
About The Author
Ashley Barratt has over 25 years experience optimising cash collection for global blue chip businesses. Leveraging his 15 years of experience at Centrica, he has secured Barratt, Smith and Brown’s position as a leading provider of outsourced recoveries support to the utilities sector with clients including Business Stream, Corona Energy and Shell. Under his direction, Barratt, Smith and Brown have also taken a lead role in managing UK energy administration collections – handing over 85% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide.