There are 4 key factors that will give your business the best chance to optimise your debt collection rates. Consider these elements and you will support your organisation’s cash flow and minimise bad debt.
Do not let your ledgers age
There is a strong correlation between the age of invoice and its collectability. As a debt ages the probability of collecting it decreases as illustrated in the below graph. It is for this reason that most debt collection agencies charge different rates to collect a debt depending on its age.
It is therefore critical to have a seamless process which ensures your ageing ledgers move to a debt collection process when it is no longer time, resource or cost efficient to continue to service them within your credit-control function. If there is no established process in place the ledgers will age, the probability of collecting them decrease and the possibility of increasing your volume of bad debt increase. Fast action is critical to optimising your debt collection rates and maintaining cash flow.
2. Ensure data accuracy
The second key factor is the quality of data you keep on your customers. Accurate contact information which includes email, telephone numbers and address can have a dramatic impact on the ability to collect a debt. Data accuracy is one of the key reason’s the age of a debt can be such a critical factor in debt collection as data accuracy will always diminish over time.
3. Accuracy and availability of support documentation
Documentation is a critical component for successful debt collection. It is important to ensure your contract with your clients clearly outlines your payment terms and the consequences for defaulting. This will not only minimise potential payment issues down the line but also provide a solid foundation for future collections activity. Access to copies of invoices, account statements, credit applications, personal guarantees, and any additional correspondence between your company and your delinquent customer will be important to the success of any debt collection activity
4. Visibility of account collections history
Providing access to historic collections activity regarding the account will enable any debt collection activity to follow on seamlessly from your credit-control. This will allow your debt collection team to utilize any learnings to expediate cash collection – as well as ensure your customers are not frustrated by inconsistent communication.
About Barratt Smith Brown
Leicester based Barratt Smith Brown, has established a strong reputation for providing market-leading debt collection support to the utilities sector. Leveraging CEO Ashley Barratt’s 15 years of experience at Centrica, they have not only provided outsourced support to key industry players such as Business Stream, Bristol Energy and Shell, but have taken a lead role in managing collections for UK energy administration collections – handing over 75% 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.