In mid-January 2013 we received an enquiry about collecting a £52,000 UK B2B debt for services provided. The prospect said he was shopping around for the best deal; demanding the lowest commission rate he could get because “we know the debtor will pay.”
In order to quote, we asked for more detail about the debt: 24 months overdue, with three negotiated arrangements that had all failed to materialise. The debtor’s credit report showed a £1,000 credit limit, two recent CCJs, a 91 day DSO and reducing profits.
Our prospect stated that he had three quotes from rival debt collection agencies; all of them quoting under 5% commission to undertake the task. We said we’d need more information before committing to a quote, a decision that received a most unexpected reaction. He demanded to know why we wouldn’t quote! We explained that we earn commission on monies recovered, so an old and large debt with a debtor showing some distress, meant we needed more information. Far from putting off our prospect, this unexpectedly won his attention, and we negotiated.
He agreed to pay us £200 to assess the file; we provided a report, with our recommendations and a quote of 12% commission. Why did we change our mind and quote? Our assessment uncovered an email from the debtor, written four months after the invoice date, and containing two linked comments: first, that they acquired a business shortly after receiving our prospect’s services and had been unable to act on (our client’s) received advice as quickly as they would have liked; second, that they intended to pay, but only after they’d sorted out their short-term cash flow problems. In short, we had suspected a dispute but had uncovered an admission of debt instead.
Our quote was accepted and we contacted the debtor. It was clear that all rational communication between creditor and debtor had long since ended, to be replaced by accusation and counter-accusation. We explained the ‘admission’ email, the significance of broken settlement arrangements, and the urgent need to make a commitment to pay if escalation to legal action was to be avoided.
The payment arrangements, each based on emotion rather than evidence of failed service provision, had reached a high of £38,000; we said we’d accept £26,000 immediately, plus two monthly instalments of £13,000 in exchange for waiving the late payment interest and compensation. The debt has now been paid, and the client has received £45,560 after our charges. Our client was lucky, in many similar cases we’ve seen, the debtor would already be insolvent.
