How to improve your debt recovery rates

In times of economic uncertainty, everyone feels the squeeze.

Cash flow tightens, invoices go unpaid, loan repayments lag, and creditors place greater emphasis on recovering outstanding debt.

One in six businesses have no cash reserves, which means that if they are impacted by economic conditions out of their control, the likelihood of them paying their debt plummets. As we continue to see a high level of insolvencies, and over 10,000 businesses are 30+ days beyond terms on their invoices, this risk is only likely to grow.

Debt recovery is often time-consuming and expensive, and in some cases, the cost of pursuing a debt outweighs the value of the debt itself. Raising debt recovery rates is not about chasing more, but making better decisions about who to pursue and when to act. Access to reliable and current data is central to this.

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Reasons why debt collection fails

Incomplete or out-of-date information on accounts

Recovering debt becomes very difficult when the data you’re using is incomplete or inaccurate. If you don’t have the right contact details, taking action is almost impossible. Creditors run the risk of not being able to contact the right person, resulting in a lot of time and money wasted with no return.
Your key contact is no longer involved with a business

Changes in the team structure of a business you’re recovering debt from can lead to records becoming disorganised, meaning others within the organisation may struggle to resolve outstanding balances. Also, if their emails are not being picked up by someone else, you may not be able to get back in touch with the business easily, especially if the business is small.
All debt is treated the same

When you lack visibility, every overdue account may seem equally recoverable. The reality is, there will be times where a debt has little chance of repayment due to the circumstances of the debtor. As a result, recovery teams risk spending far too much time working on accounts that were never going to be able to pay back their debts, taking the attention away from accounts that are more likely to pay.
A business has stopped trading

When a business ceases trading, debt recovery becomes far more challenging. In most cases, the company has no assets to recover, and legal action becomes impossible once the business no longer exists as a legal entity. As the debt remains with the company, not its owners, options become very limited and significantly more expensive. Early visibility of financial distress, prior to failure, leads to a higher chance of mitigating loss.
Recovery takes too much time

Trying to track down a debtor takes time. If you don’t have access to accurate data on your debtor, recovery teams can find themselves going round in circles attempting to trace individuals and confirm their status. The longer the process takes, the less likely recovery becomes.

Trace an individual

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How to improve debt recovery rates

Earlier intervention

Delays reduce your chance of recovery, especially when an individual or business is in financial distress. Regular monitoring of customers or businesses that owe money enables you to act instantly when there is sign of trouble, mitigating risk before it escalates too far.

Smarter prioritisation

Not all debts are equal, so they shouldn’t all follow the same process. Understanding which accounts are viable allows teams to focus efforts where payment is more likely, improving overall debt recovery rates.

If you know an individual or business is in severe financial distress, you can come up with a better plan, whether that is longer repayment terms, a reduced amount, or even wiping the debt entirely.

Better data

Debt recovery is far more effective when decisions are made using data rather than assumptions.

Working without accurate data on the position of your debtor increases the risk of wasted time. By contrast, having access to detailed credit data helps teams understand who they are dealing with and verify their status, so that they don’t have to chase blind.

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What is the easiest debt to recover?

Generally, low value and more recent debt are the easiest to recover. The longer the debt is ignored, the more likely it is for documentation to go missing and contact details to become outdated. Therefore, early intervention is a must to successful debt recovery.

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What tools can you use for debt recovery?

Your strategy for recovering debt should start long before the payments you expect are overdue. The right tools will help you to spot signs of non-payment in advance, giving you the best likelihood of recovery.

Real-time alerts

The most effective debt recovery starts before payment issues arise. With Company Monitoring, you can receive real-time alerts on significant changes to a company’s status, such as credit score or limit changes, updates to company details, CCJs, or insolvency events.

These early warnings enable you to act quickly when signs of financial difficulty appear, rather than discovering problems after it’s too late to recover what you’re owed.

Ledger Insights

When managing a large ledger, it can be difficult to keep track of who owes what, and who poses the greatest risk.

Using a tool like Ledger Insights can help you to prioritise collections based on risk indicators such as age of debt, typical days beyond terms (DBT) and business size, just to name a few.

Not only does this help you to spot any issues before they turn into cashflow problems, but it also enables you to set realistic payment terms.

Debt letters

Clear communication is a top priority in debt recovery. Regulations are strict to ensure that debtors are not harassed or pressured.

If polite reminders are being ignored, a formal debt collection letter, also known as a letter of demand, can be an effective next step.

Sent by post, this letter formally informs the debtor of their legal obligation to pay and can include options such as a payment plan if repayment is a challenge.

Debt letters should only be used if earlier steps have been attempted and have failed.

Debt collection agency

In a lot of circumstances, recovering debt on your own can be time-consuming and complex, especially when debtors are unresponsive. Strict regulations mean that there’s also a risk of non-compliance if debts aren’thandled correctly.

A debt collection agency brings expertise and dedicated resources to engage with debtors professionally and negotiate payment plans that work for both parties. This can often be more cost-effective option than chasing yourself, as their experience allows them to negotiate better terms much quicker.

Through Creditsafe, you can search for the businesses you need to follow up with and work with our trusted debt collection partners on a no-win, no-fee basis. All you need to do is provide the details of the business.

Trace and Investigate

Sometimes, recovering debt is difficult simply because you don’t have enough information on the debtor.

A tool like Trace by Creditsafe helps you to locate individuals or businesses using limited details such as a name or last known address. This links to information such as address history, residency judgments and deceased records.

If you have a high volume of debts to track, more complex debts, or simply need more data, our Investigate tool is the perfect choice, providing access to over 2 billion records. This allows you to uncover hidden connections and gain a complete view of an individual or business, including credit-linked addresses, Land Registry data, loan application data, and CCJs.

These tools give you the intelligence needed to take informed action, no matter how complex the case is.

Go beyond the surface

Modern debt recovery is about understanding the people behind the debt. Using Investigate, you can reduce costs and gain back valuable time with all the data you need to identify the right people.

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