Recent government statistics on company insolvencies are ringing alarm bells across the debt collection sector. The latest quarterly figures show that total company insolvencies in Q2 2023 increased by 9% from Q1 and by 13% year-on-year, reaching their highest level since 2009. The monthly statistics for July 2023 show that there were 248 compulsory liquidations; that’s 81% higher than July 2022.
If you’re a business owner, there are two reasons to be concerned about these statistics. When the going gets tough economically, you need to keep direct costs and overheads down as much as possible to protect your profitability. Secondly, you need to keep a tight rein on debtors to protect your cash flow and avoid debt write-off.
Are your cash reserves under pressure?
If your business is lacking liquid funds, it could be time to think about debt purchase. By selling a debt to a reputable debt collection agency (DCA), you’ll not only relieve yourself of the stress of chasing the debtor; you’ll also be taking decisive action to avoid debt write-off. The debt is off your books and no longer a drag on your bottom line, but when it’s recovered you should get at least 50% of what you were owed.
Why you need to act fast
With late payment rates rising, it’s vital to take action as quickly as possible to recover a debt. Otherwise, there’s a risk that the debtor’s financial situation may deteriorate further and increase the risk of default.
It’s also worth remembering that you’re legally entitled to charge the debtor interest for late payment. Following the latest interest rate increase by the Bank of England, HMRC recently announced a rise in the rate of interest you can charge on overdue debt. Read more here.
Persistence can pay off
Against the backdrop of a difficult trading environment and economic pressures, being diligent about debt collection is mission critical. It’s not just about showing the debtor that you won’t simply give up and accept late payment or the risk of write-off. It’s about being at the front of the queue, so that if there is money available, payment of your debt is prioritised.
Struggling to get staff?
If you’re finding it difficult to recruit for your finance team, you’re not alone. The Association of Chartered Certified Accountants (ACCA) and The Institute of Chartered Accountants in England and Wales (ICAEW) both recently reported on the skills shortage that’s been affecting the accountancy sector for some time.
Outsourcing your debt collection and debt management to a DCA could be the perfect solution. Even if your in-house team is at full strength, they may have other priorities and credit control may be taking a back seat. Having the support of a professional team of expert debt collectors and advanced technology tools can relieve pressure on your financial resources. That means you can focus on more important things, such as winning new business and identifying growth opportunities.
The time is right
At Redwood Collections, we offer a comprehensive range of debt collection and debt management services. We have a strong track record of success, even in the most challenging of cases. What’s more, there’s no upfront financial commitment, so you won’t have to put additional pressure on your business finances to recover the money you’re owed.
Our debt purchase solution, BRANCH, also gives you a simple alternative to writing off bad debt. You could receive returns of up to 50% of the debt value.
Working together, we can help your business not only survive the current economic crisis, but also Grow Stronger.
