When you’re looking to get your unpaid invoices paid, you might see the phrases debt recovery and debt collection mentioned regularly. You might assume that they’re the exact same thing - but actually they’re completely different. We’re going to examine how they’re different, and lay out the pros and cons for both debt recovery and debt collection.
What is debt collection?
Debt Collection is the act of collecting in overdue invoices or payments owed to you. For example, you as a business owner may have an invoice that hasn’t been paid for over four months - so you decide to collect the debt yourself. You may use free templates online, or decide to take your debtor to the small claims court.
What is debt recovery?
Debt Recovery is the act of collecting in overdue invoices or payments by a third party on behalf of someone else. For example, you as a business owner may have an invoice that hasn’t been paid for over four months - so you decide to call in a debt collector. The debt collector would work on your behalf to collect this debt, usually working for a fee or a percentage of the total amount collected.
What’s the difference between debt collection and debt recovery?
The key difference between debt collection and debt recovery is the involvement of a third party. Debt collection is something that you, the business owner, does yourself, whereas with debt recovery you hire someone else to collect the debt on your behalf.
Benefits of debt collection
- When you’re doing debt collection yourself, you have control over everything that’s going on - you know what’s happened and what communication has been sent.
- Because you’re doing the debt collection yourself, you can decide on tone of voice, the period between letters, and other factors
- Debt collection is free - to an extent.
Benefits of debt recovery
- When you hire an expert to recover your debts, you know that they’ll be doing the best job. They have the expertise necessary to collect your overdue invoices.
- With a debt recovery agency, you don’t have to spend time and energy on debt collection - you can focus on the most important thing, running your business.
- There’s a much higher chance of success with a debt recovery agency.
Cons of debt collection
- The main con of doing debt collection yourself is that you’re not an experienced debt collector - you won’t have the knowledge or experience of a debt recovery specialist.
- It takes time and energy to collect debts yourself - and you could be spending that time on your business.
- If you undertake the task of debt collection yourself, you won’t be using a proven process - if you’re using a process at all. A debt recovery software like itsettled’s will ensure that you’re following all the correct procedures and staying on the right side of the law.
Cons of debt recovery
- There’s a potential to alienate customers when using traditional debt recovery services, as you’re not aware of the tone of voice of the communication, and you don’t have the transparency on how often your customers are being contacted.
- A traditional debt recovery agency can charge you a large fee or percentage of the invoice being chased - however, this isn’t always the case. See itsettled’s competitive pricing strategy for example.
- With many traditional debt recovery agencies, you can feel like you as the business owner, doesn’t have any control over the process. But with itsettled’s automated debt recovery software, you’re always in control.
itsettled’s debt recovery software
Our software combines the pros of both debt collection and debt recovery with none of the cons. itsettled’s debt recovery software is an award winning software built on three decades of experience. Our CEO and co-founder Glen has contributed to the parliamentary review on late payment and is an active member and Fellow of the Chartered Institute for Credit Management - so we’d say he’s pretty great at what he does.
itsettled’s debt recovery software is fully automated, meaning that you can sit back and relax, knowing that we’re protecting your business growth on your behalf. We provide so much more than a piece of software - from free credit reports on your customers to a multitude of platform features that simplify the process even more, we’ve created something that’s got your back. With itsettled, your customers won’t know you’re using an external software - all communication looks as if it comes directly from your email address.
Sign up for a free seven day trial of itsettled’s debt recovery software.