Attorney at law or debt collector? Costs of debt collection

You can entrust your receivables to an attorney at law or to a debt collector. The methods differ and the costs vary as well.  Hence, how do you choose between those two?

Appointing a third party

Professional credit management includes an appropriate and systematic follow up of invoices due by your clients and the timely issuing of reminders.  If this doesn’t work, you better appoint a third party to assist you.  You have probably a few (5%?) strategic clients on which you should focus yourself but the remainder (95%) is better outsourced. Your collection partner is specialized in such matters and has the tools to book success in a cost effective and timely manner.

Choosing a collection partner is basically similar as to any supplier selection: select at least three (based on recommendations, internet or other methods).   Make a strengths-weaknesses table. Contact them and meet them so that they explain their methods to you.  The key aspects of debt collection are the success ratio, the administration burden, and your image.

Success ratio

The only way to assess a debt collection activity is to compare the face value of your receivables (the total of the invoices you entrust) with your net back (the amount collected minus the costs of debt collection).  You can refine this by entering an element of time: collected after 1 month, 2 months, etc. and put this in a table (entrusted in Jan 2017, collected after 1, 2, etc. months; entrusted in Feb 2017, collected after 1, 2, etc. months).

All debt collection professionals claim excellent success ratio. Ask existing clients as they will know better.

Simple administration

Transmission of claims and reporting must be fluent.  No need to add administration costs on the cost of unpaid debts. Watch the way money is paid back to you: is it systematic and monthly, is it clear as to what is paid to you for which of your debts?  Do you get a report in case of failure so you can amortize the item in your books and get VAT back?

Your image and reputation

A happy customer will inform another person about you from time to time. An unhappy customer will spread his grief as much as he can. Aggressive debt collection is less effective in terms of success ratio but adds costs in terms of marketing and reputation.

Debt collectors and costs

A debt collector works usually on a no-cure-no-charge basis.  TCM does so. This entails that you don’t pay for fruitless actions. TCM will charge you a percentage of the money actually collected. This percentage is agreed in advance (before we start our collection efforts, and per contract) and varies according to the age of the debt when entrusted and the location of the debtor (BE, Europe, Elsewhere).

The debt collector avoids courts because it is slow and expensive. He is skilled and also trained to establish a positive communication with your debtor and to follow up with him until payment. Naturally, debt collectors have in-house lawyers as the legal aspect of a claim is important. But the decisive skill in debt collection is constructive communication.  It is efficient (success ratio) and doesn’t impair your image.

At TCM, less than 1% of the claims need court action. That is when the debtor won’t pay through amicable efforts and the debtor seems solvent and the claim is adequately proven. That means that you don’t need to pay for obtaining a court order that you won’t be able to get executed.

Attorney at law

Attorneys at law charge on a combination of an hourly rate, a fixed fee and a result basis. Besides, they charge for costs. In Belgium, it is legally forbidden for an attorney at law to work on a no-cure-no-charge basis.  When entrusting a matter to an attorney, ask a written explanation on their cost structure.

Attorneys at law are, by education, prone to go to courts. Whilst courts are inevitable for some claims, they can be avoided in most cases. Courts entail also the use of bailiffs and costs are added accordingly. Court costs are never fully predictable. Let alone because the other party can appeal or because execution can get complex. Out of court is cheaper, faster and better for your relationship with your client (the debtor).

Go to Attorneys at law for claims that you can’t solve amicably and where the debtor is solvent.  They are then the only solution.

Some Belgian attorneys have partnered with bailiffs and offer a “no cure no fee full service”. This is illegal, as is “strong arm debt collection”. Illegal methods are expensive in the long term!

Conclusion

Recovering overdue debts is always expensive. These costs can be limited through an adequate choice. Debt collectors will handle 99% of your claims out of courts, amicably and reputation safely, in a cost effective and cost predictable way and in a timely manner. For the remaining 1%, courts are inevitable and the debt collector will assist you for that part too if you wish.

You wish more details on what we can do for you?  Check our website contact form or mail us!

Attorney at law or debt collector? Costs of debt collection

You can entrust your receivables to an attorney at law or to a debt collector. The methods differ and the costs vary as well.  Hence, how do you choose between those two?

Appointing a third party

Professional credit management includes an appropriate and systematic follow up of invoices due by your clients and the timely issuing of reminders.  If this doesn’t work, you better appoint a third party to assist you.  You have probably a few (5%?) strategic clients on which you should focus yourself but the remainder (95%) is better outsourced. Your collection partner is specialized in such matters and has the tools to book success in a cost effective and timely manner.

Choosing a collection partner is basically similar as to any supplier selection: select at least three (based on recommendations, internet or other methods).   Make a strengths-weaknesses table. Contact them and meet them so that they explain their methods to you.  The key aspects of debt collection are the success ratio, the administration burden, and your image.

Success ratio

The only way to assess a debt collection activity is to compare the face value of your receivables (the total of the invoices you entrust) with your net back (the amount collected minus the costs of debt collection).  You can refine this by entering an element of time: collected after 1 month, 2 months, etc. and put this in a table (entrusted in Jan 2017, collected after 1, 2, etc. months; entrusted in Feb 2017, collected after 1, 2, etc. months).

All debt collection professionals claim excellent success ratio. Ask existing clients as they will know better.

Simple administration

Transmission of claims and reporting must be fluent.  No need to add administration costs on the cost of unpaid debts. Watch the way money is paid back to you: is it systematic and monthly, is it clear as to what is paid to you for which of your debts?  Do you get a report in case of failure so you can amortize the item in your books and get VAT back?

Your image and reputation

A happy customer will inform another person about you from time to time. An unhappy customer will spread his grief as much as he can. Aggressive debt collection is less effective in terms of success ratio but adds costs in terms of marketing and reputation.

Debt collectors and costs

A debt collector works usually on a no-cure-no-charge basis.  TCM does so. This entails that you don’t pay for fruitless actions. TCM will charge you a percentage of the money actually collected. This percentage is agreed in advance (before we start our collection efforts, and per contract) and varies according to the age of the debt when entrusted and the location of the debtor (BE, Europe, Elsewhere).

The debt collector avoids courts because it is slow and expensive. He is skilled and also trained to establish a positive communication with your debtor and to follow up with him until payment. Naturally, debt collectors have in-house lawyers as the legal aspect of a claim is important. But the decisive skill in debt collection is constructive communication.  It is efficient (success ratio) and doesn’t impair your image.

At TCM, less than 1% of the claims need court action. That is when the debtor won’t pay through amicable efforts and the debtor seems solvent and the claim is adequately proven. That means that you don’t need to pay for obtaining a court order that you won’t be able to get executed.

Attorney at law

Attorneys at law charge on a combination of an hourly rate, a fixed fee and a result basis. Besides, they charge for costs. In Belgium, it is legally forbidden for an attorney at law to work on a no-cure-no-charge basis.  When entrusting a matter to an attorney, ask a written explanation on their cost structure.

Attorneys at law are, by education, prone to go to courts. Whilst courts are inevitable for some claims, they can be avoided in most cases. Courts entail also the use of bailiffs and costs are added accordingly. Court costs are never fully predictable. Let alone because the other party can appeal or because execution can get complex. Out of court is cheaper, faster and better for your relationship with your client (the debtor).

Go to Attorneys at law for claims that you can’t solve amicably and where the debtor is solvent.  They are then the only solution.

Some Belgian attorneys have partnered with bailiffs and offer a “no cure no fee full service”. This is illegal, as is “strong arm debt collection”. Illegal methods are expensive in the long term!

Conclusion

Recovering overdue debts is always expensive. These costs can be limited through an adequate choice. Debt collectors will handle 99% of your claims out of courts, amicably and reputation safely, in a cost effective and cost predictable way and in a timely manner. For the remaining 1%, courts are inevitable and the debt collector will assist you for that part too if you wish.

You wish more details on what we can do for you?  Check our website contact form or mail us!