Choosing and using a debt collection agency - Veterinary Practice
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Choosing and using a debt collection agency

COLIN McLEAN outlines what’s involved in chasing unpaid and overdue accounts

UNPAID accounts and overdue invoices – unfortunately, these are terms familiar to many veterinary professionals who rightly want to spend their time developing their practices dealing with customers and their animals but feel let down when customers fail to pay the bill!

A very familiar story is that following a letter or two and perhaps a call from the practice manager, unpaid accounts are all too often left alone, resulting in hundreds if not thousands of pounds in unpaid fees, sometimes hampering the growth of the business but certainly affecting its cash flow.

Veterinary practices can be reluctant to call in help from professional debt collection agencies to recover unpaid accounts, often worried about the reputation of the practice. The reality is that in choosing the right business partner, one who understands the nature of sensitive professional relationships, accounts can be successfully recovered and customers re-established.

So: how do you go about choosing a suitable debt collection agency?

Many UK agencies are part of large concerns, some owned by US corporations with call centres in the Philippines and India. These agencies are primarily focused on high volumes of accounts from a relatively small number of creditors – usually banks, credit card companies or utilities.

These agencies would normally not deal with businesses unable to pass at least hundreds of accounts every month for collection. The customer-client relationship is not usually of concern since the creditor will have written the debt off and is happy to lose the customer.

Other agencies deal solely with debts they have purchased: this happens when a large creditor wishes to sell an “asset” –a credit or loan book. The purchaser often pays as little as a few pence in the pound and hopes to recoup the outlay and make a profit by collecting more than it paid. Again, customer relationships are not a high priority.

Specialist debt collection agencies exist to support specific business areas, such as professional health services. These agencies offer a highly personalised service usually with excellent results and a high appreciation of brand protection and customer care.

Of course, one of the best ways of choosing an agency for your profession is to ask the agency for appropriate references.

It is important to note that the debt collection industry is regulated by the Office of Fair Trading and all companies offering collection services need to be licensed. This can be checked on-line or by asking to see the current Debt Collection Licence.

What are the causes for non-payment of accounts?

Non-paying customers can be put into two categories: the “can’t pay” and the “won’t pay” – but in both cases a professional debt collection agency will only ask for payment in line with a customer’s ability to pay.

Dealing with the “can’t pay” first: these customers genuinely do not have the resources to pay in full immediately. Often living week to week on benefits and “un-banked”, these customers live in the cash community and find it very difficult to budget. A professional debt collection agency will not press for full payment but will show empathy and assist the customer to agree a weekly or monthly budget to repay the debt in line with the ability to pay.

The “won’t pay” customers are a whole different ball game. The agency needs to uncover the reason for the unwillingness to pay. This can be a spurious dispute but is usually because they simply have not been asked to pay –Imean seriously asked to pay – politely, frankly and directly.

Of course, some customers do raise disputes that need looking into but these are usually resolved with a quick call or e-mail to the client. Veterinary-related disputes are often around insurance settlements.

What action does a debt collection agency take?

A debt collection agency can take a variety of approaches to recover an overdue account – none of them is rocket science but to be successful they do require an inordinate amount of experience. In addition, the best debt collection agencies employ people who are thoughtful, articulate, self-reliant, resilient and above all good listeners.

Agencies will use a range of well-proven collection letters, carefully chosen and often written for specific clients to elicit an early response from a customer. This is followed up by telephone contact where necessary. Payments by debit or credit card are usually taken over the phone.

Most accounts, particularly for professional services, are resolved by letter or telephone; in fact, experience shows as many as 85% of debts can be collected this way.

Using the County Court and Field Collection Services are very much a last resort and usually reserved for larger balances or where a customer has multiple unpaid accounts. However, debt collection agencies will normally discuss taking court action and further possible legal remedies with the client before proceeding.

How much will it cost to recover an unpaid account?

Put bluntly, it will cost the practice the full amount of the debt owed if nothing is done and the account just gathers dust! It can also send a message to the local community and practice customers generally that they don’t need to pay if they visit or use your business.

Many agencies have a menu of charges – some baffling even to those in the industry. Some have “registration” fees and file fees, essentially a fee to take a client on and a fee for taking on each debt irrespective of result. Whilst a fixed commission rate can be agreed, it is usual for a scale of fees to be provided dependent simply on the age of the debt (how long it has been overdue) and can range from around 8% to a little over 20% or so.

A professional debt collection agency will not charge any fees in advance, its fees will be transparent with no hidden charges and, most importantly, will only charge on successful recovery.

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