A Complete Guide to Debt Collection


It is common for both businesses and private individuals to find themselves in a position where they are owed money.

There are a variety of reasons why this may occur. For example, a business might have provided goods or services for a client that has later disputed an invoice and withheld payment. Alternatively, a private individual could have loaned a friend money who is now refusing to repay what they owe.

No matter the circumstances surrounding the creation of the debt, it is important that any owed money is recovered as quickly as possible.

If there is a delay, it may become more difficult to collect it as time goes on. For businesses, a healthy cash flow is needed to maintain and grow the company. If this is affected, a company’s debt portfolio could grow and its income would be put at risk.

Everyone has their own bills to pay, and late or non-payments can cause a lot of problems quickly. Studies have shown that the total amount of money owed to people in the UK had grown to £1.7 billion in June of 2021.

When faced with the prospect of recovering a debt, many people are unsure of what to do. It is important to understand what options are available, as well as the type of debt you are dealing with.

Explaining the Different Types of Debt

There are several different types of debt, with most debts falling into one of 3 main categories.

Commercial Debt

A commercial debt is created when a business is owed money. This could be from either another company (B2B) or a private individual (B2C) depending on the business in question.

Typically, businesses trade by providing goods or services before issuing an invoice. If this invoice is ignored it will be declared ‘overdue’, and the debtor will need to be chased. Many businesses will first attempt to recover a debt in-house using a credit control department.

Businesses often set up payment terms of 30-60 days. If payment is not made within this time frame, it is common for a third party like a commercial debt collection agency to become involved to recover the owed money.

Private Debt

The term ‘Private Debt’ refers to any money that a private individual owes. This might be the result of money that has been loaned to a friend, or when a person has provided goods or services.

Freelancers, Sole Traders and those that are self-employed are often owed private debts. For example, a freelancer will complete a project for a customer who later decides that they do not want to pay. For smaller enterprises, this can represent a significant blow to their cash flow and must be acted on as soon as possible.

A common issue people that are owed a private debt must deal with is that they often do not have the time available to chase the debt themselves. A good option for people in this position is to seek out a private debt collection agency to help enforce the collection of the debt.

International Debt

International debt is any case where either a person or a business is owed money from someone in another country.

Many people will go to any length to avoid paying what they owe. One belief is that a debtor will be protected from the repercussions of not paying a debt simply by them being based in another country.

This is far from the truth, and a skilled debt collector will possess the knowledge and the expertise necessary to recover a debt from someone in any country.

The process of recovering an international debt is perceived as being more complex and challenging. Whilst this is understandable, it is not necessarily the case. There are specialist international debt collection agencies that have global networks of agents that are ready to recover owed money.

How To Recover a Debt

There are many ways in which a debt can be recovered. Popular methods include:

  • Recovering a debt independently
  • Court Action
  • Instructing a Professional Debt Collection Agency

When considering options for debt recovery, you should remember that a specialist in the type of debt you are owed will be more effective.

The most beneficial, cost-effective and productive way in which a debt can be collected is by using a professional debt collection agency. An agency will be able to recover your money swiftly, whilst resolving the matter amicably. It also allows you to concentrate on value-based actions, which is of particular importance for businesses or those that are self-employed.

For example, Federal Management is the UK’s leading commercial debt collection agency. For B2B debts, they are regarded as the most low-cost and effective agency available. They provide a fully comprehensive debt recovery service and are the only UK agency to be regulated by the Financial Conduct Authority (FCA).

For International and Private Debt Collection, Frontline Collections are considered to be the best in the UK. Their global network of trusted debt collection agents can recover owed money from virtually anywhere in the world. Frontline Collections also specialise in every working sector possible. For example, they are the Independent Schools Association’s ‘Gold Preferred Supplier’ for the recovery of private schools debt.


About Author

Founded in 1994 by the late Pamela Hulse Andrews, Cascade Business News (CBN) became Central Oregon’s premier business publication. CascadeBusNews.com • CBN@CascadeBusNews.com

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