Customer Benefits - Debt Collection Written by Kaizen Enterprises Pty Ltd
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Debt Collection

 

Key points:

  • Collecting debts before they age means reduced borrowing costs, fewer bad debts, and freeing valuable employee time.
  • You will gain the most benefit from engaging Kaizen Enterprises when the debtor has broken promises, made baseless claims, or disappeared.
  • We collect debts by employing a range of focused strategies, and allocate more time and resources to each debt.
  • We usually collect debts on a ‘results only’ basis, which means that we have 100% of our compensation at risk.

More information:

Collecting outstanding debts before they age is a critical aspect of any business’ financial management. The Australian Institute of Credit Management estimates that, on average, if a debt is still outstanding six months after the due date, only 67 cents in the dollar is recoverable. If the debt remains uncollected after a year, on average a mere 45 cents in the dollar can be recovered. In addition, employees who are assigned to collecting ‘bad’ accounts are unable to spend their time working on optimising cash flow from non-delinquent debtors.

You will gain the most benefit from engaging Kaizen Enterprises when a debtor has:

  • Broken two or more promises to pay; or
  • Repeatedly provided worthless excuses for non-payment, such as continual requests for invoices which have previously been supplied; or
  • Refused to enter a repayment arrangement; or
  • Belatedly claimed that there is a dispute regarding the goods or services not paid for; or
  • Had their phone disconnected; or
  • Moved premises without leaving a forwarding address.

Using a professional collection service will often save you time and reduce the collection cost, while freeing your personnel to concentrate on controlling cash flow. Delinquent debt can be very resource intensive to chase and frequently involves insolvent debtors, debtors that have left their given addresses, or people who are professional at breaking promises. If the debtor is short of funds, then the earliest possible discovery of this provides you with the greatest possible chance of collecting the debt.

In most cases debts are collected through focused activity, tenacity, perseverance and persistence. Kaizen Enterprises employs strategies such as:

  • Ringing or visiting debtors at hours when they can be contacted (including after hours and weekends);
  • Carefully documenting agreements and providing written evidence of agreements immediately to debtors;
  • Seeking post-dated cheques;
  • Pursuing broken arrangements the day after the breach;
  • Resolving all issues that impact on the debt;
  • Being considerate, respecting the debtor and recognising that sometimes even the best plans fall over;
  • Maintaining a healthy relationship with the debtor; and
  • Being tough-minded when necessary.

Kaizen Enterprises usually collects debts on a ‘results only’ basis, which means that we have 100% of our compensation at risk.  Although we have a variable fee scale that is determined by factors such as the age of the debt, the difficulty of finding the debtor, and whether collecting the debt involves resolving any previous disputes, we also allocate more time and resources to each debt, which often results in a higher net return.

For example, on $100,000 of debts an agency with a low 5% commission may have a collection rate of just 1 in 3, resulting in a return after fees of $31,666. By contrast, Kaizen Enterprises, with both more at risk and more time and resources allocated to each debt, will often achieve a collection rate of 3 in 5. Therefore if you paid a fee of 20% on the same $100,000 your net return after fees would be $48,000, a 50% better result.