Complete payment recovery services refer to the full suite of services offered by companies to help other businesses recover unpaid or late payments from customers or clients. This can encompass gentle reminders, firmer demands for payment, negotiations, legal action, and attempts to recover funds from insolvent customers.
Why are complete payment recovery services needed?
Many businesses struggle with late payments and non-payments from customers. This ties up capital and strains cash flow. According to a survey by Intrum, a leading European credit management services company, over 50% of invoices issued by businesses are paid late. The problem seems to be getting worse – the value of late B2B payments in Europe is forecast to rise to €2 trillion by 2025.
Reasons customers might not pay on time include:
- Administrative errors and lost invoices
- Disputes over payment terms, delivery issues etc
- Deliberate late payment tactics
- Cash flow issues
- Insolvency
Businesses often do not have the time, resources or expertise to efficiently chase late payments. Professional payment recovery services step in to provide a complete solution encompassing technology, expertise, legal capabilities and economies of scale.
What services do complete payment recovery providers offer?
Payment recovery services offer an escalating suite of options to recover unpaid invoices. This usually includes:
Gentle Reminders
Automated reminders are sent when an invoice becomes overdue. These advise the customer of the late payment and request prompt settlement.
Firm Letters and Emails
If automated reminders are ignored, payment recovery providers can send increasingly firm letters and emails demanding payment and setting out the consequences of further non-payment.
Letters Before Action
A letter before action formally demands payment within a set time frame before legal action commences. These letters carry legal weight.
Phone Calls
Payment recovery staff will personally call late payers to discuss late invoices and negotiate payment plans if needed.
Legal Action
For recalcitrant late payers, legal action can be commenced through the courts to compel payment. Options include money claims, winding up petitions and statutory demands.
Insolvency Recovery
Where a customer becomes insolvent, payment recovery companies can assist in submitting claims to liquidators and administrators to recover payments from assets and insurance.
This escalating recovery process applies increasing pressure on late payers to settle invoices promptly. Most late payments are recovered during the early reminder stages.
When should businesses use payment recovery services?
Some key situations when payment recovery services should be considered include:
- The business has significant problems with late B2B payments
- In-house credit control efforts have failed to recover late payments
- The number of overdue invoices is impacting cash flow
- Payment terms are frequently exceeded by more than 30 days
- The value of unpaid invoices is high enough to justify the cost of recovery services
- Legal action is required to recover payments
- A customer has become insolvent owing money
Most businesses wait too long before enlisting help from payment recovery companies. Engaging these services sooner improves cash flow and reduces administrative costs chasing payments.
What are the benefits of payment recovery services?
Key benefits of using complete payment recovery services include:
Improved Cash Flow
Recovering unpaid invoices faster improves cash flow and working capital availability.
Reduced Administrative Burden
Chasing payments takes up significant staff time and resources. Outsourcing this work frees up staff for more productive tasks.
Better Recovery Rates
Specialist payment recovery firms have greater success than in-house teams in recovering late and overdue invoices.
Lower Costs
At scale, payment recovery services have lower costs per invoice chased compared to dedicating in-house staff.
Access to Legal Options
Payment recovery providers have access to legal processes and expertise that can compel payment from delinquent customers.
Impartiality and Consistency
As independent third parties, payment recovery firms can objectively pursue late payers without harming commercial relationships.
| Benefit | Description |
|---|---|
| Improved Cash Flow | Recovering unpaid invoices faster improves cash flow and working capital availability. |
| Reduced Administrative Burden | Chasing payments takes up significant staff time and resources. Outsourcing this work frees up staff for more productive tasks. |
| Better Recovery Rates | Specialist payment recovery firms have greater success than in-house teams in recovering late and overdue invoices. |
| Lower Costs | At scale, payment recovery services have lower costs per invoice chased compared to dedicating in-house staff. |
| Access to Legal Options | Payment recovery providers have access to legal processes and expertise that can compel payment from delinquent customers. |
| Impartiality and Consistency | As independent third parties, payment recovery firms can objectively pursue late payers without harming commercial relationships. |
What payment recovery services are available?
There are a wide range of complete payment recovery services on the market. These include:
Debt Collection Agencies
Traditional debt collection agencies offer services to recover late B2B payments. They use letters, phone calls and legal means to collect debts.
Credit Management Companies
Credit management firms offer a wider range of services encompassing credit risk assessment, insurance, factoring and complete debt recovery tailored for B2B clients.
Law Firms
Business law firms often have specialist payment recovery departments offering legal services to pursue late payments.
Online Payment Recovery
New online payment recovery platforms allow automated recovery of late invoices. Users can track recovery progress through an online portal.
International Recovery
For businesses trading globally, some payment recovery firms offer international debt collection capabilities across multiple jurisdictions.
When selecting a payment recovery provider, it is important to check their track record, range of services and costs to find the best fit for your business needs.
What techniques do payment recovery services use?
Specialist payment recovery services utilise a range of techniques and leverage certain advantages to improve recovery rates, including:
Letters and Phone Calls
Carefully crafted letters and skilled negotiation by phone are used to persuade customers to settle invoices.
Legal Knowledge
Expert understanding of debt recovery laws and processes allows providers to compel payment through courts.
Technology
Automated systems send reminder emails and letters, then allocate accounts for personal follow up based on risk criteria.
Credit Expertise
Analysis of customers’ creditworthiness and financial difficulties allows providers to tailor optimal recovery strategies.
Outsourcer Impartiality
As third party agents, recovery firms are perceived differently to a customer’s supplier, enabling productive interactions.
Economies of Scale
By recovering payments for many clients, providers achieve cost savings they can pass on through competitive fees.
Ethical, customer-focused techniques generally yield better outcomes than aggressive approaches in recovering late B2B payments.
What does the payment recovery process look like?
A standard complete payment recovery process involves the following stages:
Initial Review
The payment recovery provider reviews the age and value of unpaid invoices and the profile of late paying customers.
Gentle Reminders
The first contact is gentle payment reminder emails and letters to prompt customers to pay overdue invoices.
Firm Demands
If initial contacts are ignored, firmer emails and letters are sent demanding payment and outlining consequences of non-payment.
Call Negotiations
Personal phone calls try to negotiate payment plans and understand reasons for non-payment.
Legal Action
For recalcitrant late payers, legal processes can be commenced to compel payment.
Recoveries
Successfully recovered debts are returned to the business client after deducting fees.
Reporting
Detailed reporting provides transparency around amounts recovered, fees deducted and remaining unrecovered debts.
This staged approach applies increasing pressure for payment. Most debts are recovered in the early phases through letters and negotiation calls.
What are common payment recovery fees and costs?
Payment recovery providers typically have flexible fee structures, which may include:
Commision on Recovered Debts
Fees taken as a percentage commission on successfully recovered debts. Usually ranges from 15% to 50%.
Fixed Fees
Fixed fees for certain activities like sending initial reminder letters.
Variable Fees
Variable fees that increase based on the escalation of recovery actions.
Non-Recovery Fees
Smaller fees may still be charged for unrecoverable debts to cover administrative costs.
Legal and Court Fees
If legal action is pursued, legal advisor and court fees may also be charged.
Reputable providers offer transparent fee structures without hidden costs. Comparison of commission rates and fee tiers can help identify cost-effective services.
What are key statistics on payment recovery?
Some key statistics on payment recovery include:
- On average, over 50% of B2B invoices are paid late (Intrum)
- Late payments are worth an estimated €2 trillion annually across Europe (Intrum)
- Almost 25% of insolvencies are directly caused by late payments (Intrum)
- 70% of businesses say chasing invoices takes up more than 5% of their time (Sage)
- Outsourcing payment recovery can improve debt recovery rates by up to 20% (Atradius)
- Most invoices are recovered in the pre-legal stages of payment recovery processes
- Payment recovery costs range from 15% to 50% commission fees on recovered debts
These statistics demonstrate the large scale of late payment problems and the benefits specialized recovery services can provide through higher success rates and time savings.
What laws and regulations apply to payment recovery?
Key laws and regulations governing payment recovery services include:
Fair Debt Collection Practices Act (FDCPA)
In the US, the FDCPA regulates practices of third party debt collectors, including banning harassment and false statements.
Licensing Requirements
Many US states require debt collection agencies to obtain licenses to operate. Unlicensed activity can attract penalties.
Data Protection Laws
Stringent data protection laws like the GDPR in Europe govern how customer data can be used in the recovery process.
Consumer Protection
Debt collection laws protect consumers from certain tactics. B2B payment recovery has fewer restrictions.
Pre-Legal Court Processes
Laws like Pre-Action Protocols in the UK impose good faith obligations on parties before commencing legal action.
Adhering to all relevant laws and regulations is essential for payment recovery firms to maintain best practices and compliance.
How can technology improve payment recovery?
Key ways technology is transforming payment recovery include:
Automated Reminders
Automated emails, texts and letters can be triggered to send reminders and demands without human intervention.
Digital Portals
Online portals allow 24/7 access to view recovery status, documents and reports.
Electronic Invoicing
E-invoicing speeds up invoicing and removes delays from manual processes.
Big Data and Analytics
Sophisticated analysis of payment history can predict late payers and optimize recovery strategies.
Integration with Accounting Software
Integration with accounting platforms allows seamless exchange of invoice data to start recovery.
Artificial Intelligence
AI can help optimize communications and analyze statistics to refine recovery processes.
Technology delivers efficiency gains, automation and insights that help maximize recovery rates while minimizing costs.
Conclusion
Complete payment recovery services provide a comprehensive suite of outsourced options to help businesses recover late and unpaid B2B invoices. Specialist providers employ an escalating approach using technology, data and legal means to improve cash flow by collecting overdue debts in a faster, more efficient way than in-house teams. With late payments endemic across supply chains, automated and legally empowered payment recovery services are an essential tool for businesses seeking to optimize working capital and reduce administrative burdens.