This article was born thanks to William Harrison and John Meehan from TSI whom we met in the ITW2019 Atlanta Trade Show and they introduced us to their exciting business – debt collection for telecoms.
As with all industries, telecom companies experience the hassle where there are individuals or companies who “forget” to pay their invoices on time. This presents problems for the company, especially smaller organizations, which rely on on-time payments to keep their books balanced. Due to their vast geographic organizational structure, difficulties exist in the collection of debts owed, usually due to jurisdictional arguments in various countries.
It is easy on the business side of the situation to call any reasoning bunk and demand payment, but that doesn’t work with a more millennial-driven market sector. People expect to be treated like people and not some account number which owes money. Come off too strong and the other party might just cease all communication. Don’t push enough and the debt will never be paid through a veritable forest of excuses.
Enter the business of End-to-End debt collection agencies. These companies offer complete solutions from pre- to post-charge off support. Often, the larger organizations have the licensing and personnel to reach across borders when needed to pursue a debt.
Most Common Explanations for B2B Nonpayment
The variety of “explanations” for late payments seems endless. Generally, a company looking to collect will run into one of four varieties:
Payment on the way
In this case, the entity owing the debt claims that the payment was already sent and is somewhere in the mail. Another form of this reason could be that the payment order was sent to their accounting team for dispersing of funds, and they will have to get an update from that particular team member. There can also be a rare scenario when businesses are in close proximity that the party owing the money will keep promising to stop by and pay the invoice, and never does.
Here, the owing party claims that an invoice was never received on their end. In today’s digital age, this is a little harder to use for B2B explanations as most invoicing is done electronically between businesses.
Discrepancy or they don’t owe the invoice
Probably the most contentious category, here the debtor either claims that there is a problem with the invoice. For example, it is not what was agreed upon on the initial quote, when extra or premium line items existed for a certain bill. Or, and even more confrontationally, the representative for the company owing the money flat out denies that the money is owed. This often results from dissatisfaction in a product or the service provided but can be used as a way to avoid an invoice. This approach is often only resolved through litigation as this type of mindset doesn’t care what kind of debt collection activities are initially brought against them.
This category requires understanding the debtor and their conditions, especially given the nature of the global economy currently. Smaller businesses rely on timely payments from their customers to pay invoices. Therefore, if they are not being paid, it is unlikely that the companies they owe money to will be paid. An honest a reputable small business owner will attempt to plan for repayment, but they may request more time to pay the debt. When dealing with medium to large-sized businesses, this is more than likely an excuse. Either way, before escalation, consideration and offering a repayment plan can go a long way.
Beyond these four common groups, there exist the shady business entities who just don’t pay and are not able to be contacted, either the phone is never answered, or the contact person is “never available”. There are no options but to escalate these accounts to an aggressive debt collection agency.
How much does it cost?
The cost of hiring a debt collection agency varies based on the volume of business the client provides and the amount of the debts to be collected. Some collection agencies charge a flat fee upfront to take on a fixed number of accounts. However, most take a percentage of the debts they collect, ranging anywhere from 20% to 50%. The older the account, the higher the percentage will be. This is because older debts are harder to collect and take more of their time to do so. Negotiate for the best rates, while keeping in mind that the cheapest company might not be the best to work with. Another indicator is to ask about a “no win, no fee” policy. Collection companies with high success rates may offer this for larger profiles, or for a potential repeat client.
In addition to a percentage of every debt collected, some collection agencies charge for other costs they incur while collecting the client’s debts. They may charge long distance fees or bill you for the cost of doing a background check on debtors. Be sure to ask for a complete list of fees and rates before settling on any one company.
How to start the Debt retrieval Process?
For complex accounts across international borders, a client should verify the coverage of each agency they contact to ensure that the agency is authorized to collect debt in the region of interest. To start the process of debt collection, an agency needs certain information. Initially, all the debtor’s contact and account information will need to be provided as many countries place the burden of proof on the collection agency to prove that they are authorized to commence collection activities. The collection agency can then perform its due diligence by performing the necessary pre-checks to best define a collection strategy. Afterward, the client and collection agency can agree on the terms and costs of the services which sill be provided. This is where the client should always try to negotiate a “no win, no fee” based fee schedule. Furthermore, while it usually industry standard, the client should verify that they will only be invoiced against monies recovered. After all, the supporting documents have been supplied, and the terms agreed to, collection procedures can be initiated. The client should stay informed throughout the process. Normally, a good collection agency will do this, however, if there seems to be a lack of communication, the client has the right to request regular updates on the status of their accounts.
The process to retrieve the Debt
Debt collection processes, regulations, and best practices vary by country. Therefore, complex accounts across borders are best handled by professional collection companies as they have the training, registration and regulatory knowledge to traverse these intricacies without breaking any laws. There is a general process to debt collection that is followed, however:
- Before commencing a debt collection case, carry-out a debt pre-check to ensure the business is still active and not dissolved, in administration or liquidated. Establish the credit rating, financial assessment, any existing defaults/judgments. Also, pre-check the company directors/principals to establish whether they have any involvement with other companies or a history of insolvencies, etc. This will establish whether the debtor company has any associations with active, nonactive, dissolved or liquidated businesses which could affect the ability to pay its debts.
- Send a letter advising the debtor of the debt, that it is an attempt to collect a debt, and that they have a specified amount of time to dispute the debt. If they do dispute it, provide a copy (through certified mail) of the records of the debt.
- After the time to dispute has past, send an invoice for the debt with directions on how to pay. It is at the sole discretion of the collecting agency if a repayment plan is offered, or if a settlement of the debt is possible (remember, most or even some of the money owed is better than none).
- If the debtor does not respond to the initial letter, assign a dedicated account manager who will then start a series of processes to communicate with the responsible party within the debtor’s company to establish payment, or resolve any issues such as missing invoices, disputes, etc.
- Keep the client informed through every step of the process. It is important that all parties know what is happening and where the case is at every stage; this avoids unnecessary delays with settlements and misinformation.
- If for whatever reason, the debt is not resolved through normal processes in a reasonably timely manner, then there are several options available to the client such as litigation, mediation or both. Partner with specialist law firms and mediation companies who work very closely with the client to ensure quality legal advice is always provided.
If the debt has been unable to be resolved, then legal action is required and recommended. Process and issues proceedings on behalf of the client but only with their expressed consent.
Some challenges businesses face when collecting a past due account are listed below, along with how a debt collection service can help:
- Managing and tracking debts for a large portfolio of clients:
* The intricacies and details of debt collection are key factors in collecting owed monies. A collection service is designed to keep detailed records and document interactions with clients. When an organization is dealing with many debtors, this can be a costly, daunting task. A professional debt collection partner can handle this process with services that include:
* First or Third-Party Collections – The collection agency can either act as an extension of the client company or as their own separate entity. As a third-party, they can more aggressively pursue the debt while reducing the potential business relationship harm between the client and debtor.
* Skip-Tracing – Performed in stages, the first step is to verify the information provided by the client to understand the debtor and if the client has any misinformation. The next step involves collecting as much information as possible about the debtor. The information is then analyzed, reduced, and verified. Sometimes the debtor’s current contacts are in the data but are obfuscated by the sheer amount of information or disinformation. Often, the job becomes more than mere research since one must often employ methods of social engineering.
* Portfolio Management – Managing a large series of portfolios can be time-consuming. Having an agency acting as an account receivable management (ARM) service allows for the streamlining of processes and quicker debt resolution.
* Proof of Claims Service – Bankruptcy introduces an added degree of difficulty in the collection of owed debts. Collection agencies have intrinsic knowledge of both court-mandated guidelines and timelines and can thus file bankruptcy proof-of-claims to recover the client’s money.
* Probate – Probate recovery solution focuses on an empathetic approach towards the family. Through coordination with the executors and probate courts, it is possible to expeditiously navigate through a sensitive time to streamline the process.
- Handling accounts that are no longer in business or have filed for bankruptcy:
* When a company or individual files for bankruptcy, debt collection is handled differently, and this is where a professional debt collection partner can help. As stated above, the ability to file bankruptcy proof-of-claims helps take the burden off the client while functioning within the bankruptcy guidelines and timeframe.
- Maintaining positive customer relationships:
* If a debt can be resolved amicably, a client may want to continue business with the consumer. A good debt collection agency can maintain a positive relationship while collecting the money a debtor owes. Agencies have support for both the client and consumer, ensuring everything can be done in a compassionate and diplomatic manner to get the best results for all involved.
Some Major Debt Collection Agencies
While this blog does not endorse or recommend one company over another, every client should perform their due diligence, a list of some of the major debt collection agencies is given below: