Equisettle understands this problem and knows that unpaid debt is a reality for many firms:
Most of the time, using a debt collection service arises from an honest business reality that every company is familiar with - the necessity of being paid for your work.
Equisettle also knows that it is harmful. Non-payment can lead to lost revenue and an inability to pay staff and suppliers (even if the business is profitable).
However, Equisettle believes there is a better way to address debt collection (at least, at the start). This approach offers a soft touch, avoiding nightmare phone calls and drawn-out court battles that reduce goodwill, while still providing a clear path to legal resolution when needed.
This post explores the various stages of delinquency, signs it's time for debt collection, the conventional debt collection process, Equisettle's alternative methods, and additional considerations, such as the impact on client relationships. By the end, you should know when to escalate invoices to a debt recovery agency.
Stages of invoice delinquency
The UK does not define official stages of invoice delinquency. However, most firms follow a timeline similar to the following:
0-7 days after due date: A gentle reminder
Sending a gentle reminder to customers 0 to 7 days after their first delinquency can help nudge them in the right direction and ensure you collect any funds owed. Customers may have forgotten or simply missed the fact the payment was due.
When you contact the customer, confirm the customer received the invoice and remind them payment is due. This procedure applies subtle pressure and ensures it is top-of-mind for the client.
7-30 days after due date: More pressure
Once an invoice goes unpaid for over a week, it is time to apply more pressure. However, Equisettle recommends avoiding direct or outright conflict at this stage.
One option is to issue a debt validation letter. This document proves the customer owes money and you have a basis for legal action.
Another option is to offer for the client to pay in instalments. Repayment plans can avoid the need to escalate collection agency procedures.
In some cases, customers can't pay. Usually, this occurs due to cash flow problems. In these cases, you may want to roll over old debt and wait until new money comes through. Going to a debt collector immediately might not have an effect and could lead to additional tension and hostility.
30+ days: Getting serious
Finally, if an invoice goes 30 or more days unpaid, it may be time to talk to a debt collection company. However, you need to weigh the pros and cons.
Again, Equisettle's intelligent approach can help. Its systems collect payments on your behalf while automatically preparing legal documentation, ensuring a smooth transition to formal legal action if needed. Equisettle avoids draconian measures and uses data-driven methods to assess whether specific debt collection activities make sense.
Here's what Equisettle suggests doing after 30 days of invoice delinquency:
- Ensure you maintain consistent communication with the other parties. Document contact attempts and responses, noting down or recording what customers say.
- Review your payment terms. Check they make sense to your clients. Confusing wording could be preventing consumers from paying you on time.
- Consider pulling a credit report from reliable credit bureaus for late-paying customers. These documents can reveal whether the overdue invoice is out of character. (If it is not, the customer may already have relationships with debt collectors).
Sometimes, the client loses their job or their business fails and they cannot pay. When this happens, Equisettle's automated legal document preparation can help if the case goes to court. The platform automatically generates debt validation letters that include the debt owed, the creditors (you), the debt requiring payment, the right to request the name of the original creditor and confirmation the debt is valid if not disputed within 30 days.
Factors affecting whether you should escalate a debt collector
So, when should you consider escalating an invoice to collection? What factors make an invoice more likely to be paid?
Fortunately, Equisettle has insights from processing thousands of debt recovery cases that provide some answers you may find useful:
Days past due
Equisettle recommends you escalate an invoice to legal action before it reaches 90 days overdue. Evidence suggests that more successful collections happen when invoices are between 60 and 90 days overdue.
The primary reason is the recency of the debt collection in the debtors' minds. Payments are more likely on outstanding debts on delinquent accounts when the customers remember the original invoice.
Leaving things for more than three months can hamper collection efforts. Customers may disregard payment requests (believing they are wrong) or forget they owe money in the first place.
Number of invoices
Equisettle also recommends keeping track of the number of invoices raised on an account. About 70% of successful collection requests involve multiple invoices for the same customer. This makes sense as the case for collecting is stronger when the payment delays are repeated and represent a larger amount outstanding.
Moreover, from your perspective, more invoices mean more debt and a higher urgency to receive payment. However, from the customer's perspective, it can strain the relationship. Asking them for money daily or threatening legal actions could increase animosity.
Therefore, if an account has unpaid debts, don't assume writing customers a written notice will get them repaid. Instead, look for alternative methods that maintain a positive relationship with the debtor while preparing for potential legal action (i.e. using Equisettle's intelligent communication and legal automation features).
Payment history
Checking payment history is another strategy Equisettle recommends. Customers with good credit history usually pay you at some point, even if it isn't immediately.
Look back at your records for the client, comparing the invoice issue date to the receipt of money to your accounts. See whether the overdue debt is part of a pattern or new.
Using credit bureaus to pull up a credit report can help you determine if a customer is paying their other debts (such as a business or mortgage loan). The need for legal action may become more likely if they are.
The value of the relationship
Equisettle recommends considering the value of the relationship before escalating the situation. You want to think carefully about the consequences of pressing for debt repayment too soon.
Weigh the decision to pursue fees owed against the future value of the client. If the customer is happy with the service and paid on time in the past, it may be worth providing a gentle nudge, even if the money is more than seven days late.
The attractiveness of an instalment plan
Equisettle also suggests considering the attractiveness of an instalment plan when escalating. When the client is a company or individual with poor cash flow but an otherwise healthy financial outlook, paying monthly fees with reasonable interest rates can be superior to legal actions involving an attorney.
Equisettle's payment portal makes it easy to set up and manage payment plans, automatically tracking progress and escalating if payments are missed.
Invoice amounts
Finally, Equisettle suggests checking the invoice amount. Data suggest businesses generally do not escalate invoices below £300 mostly due to the effort involved. Diverting staff to administer late payments costs time and money (that they could spend better elsewhere).
Unfortunately, some customers know this and wait to see what happens. Hanging on old debts until the last minute or forgetting about them is a popular tactic if they assume firms won't take them to court after the final collection letter.
Equisettle helps by making it clear that strategies like these won't work. The platform's automated legal document preparation means that even smaller debts can be pursued cost-effectively through legal channels, as the administrative burden is eliminated.
9 tactics to get customers to pay before escalating to a debt collection agency
Ideally, businesses want to avoid going to a debt collector (for the reasons mentioned). Creating animosity can make debt collection more challenging.
Fortunately, various tactics help companies, lenders and other creditors to make delinquent invoices less likely. Here's what to do:
1. Prompt invoicing
Send invoices to customers when delivering a product or service. The more contemporaneous you can make it, the more likely a customer will remember and pay.
Equisettle's invoice automation ensures invoices are sent immediately upon service completion, with intelligent scheduling for recurring services like the DS Cleaners case study.
2. Provide clear payment terms
Make repayment terms clear. Customers should know the date when they have to pay, any late fees and a preferred payment method.
3. Provide an early reminder
Provide clients with early reminders, letting them know about the money owed and when you expect them to pay. Try to avoid delays between delivering services and making your fee demands known.
In rare cases, you may face a statute of limitations. The law in England and Wales gives you up to six years to claim a debt. Longer than that and you may forfeit whatever money is owed where debt becomes "time-barred."
4. Avoid being aggressive
Don't be overly aggressive when attempting to collect money. Equisettle recommends remaining polite and professional at all times. Emotionality may reduce the likelihood of outstanding debts being repaid.
In the UK, consumers can complain to the Financial Ombudsman if a company, debt collector or other agency harasses them over unpaid debt. In the U.S., debtors can go to the Federal Trade Commission if they do not adhere to fair debt collection practices. These complaints may delay debt collection further.
5. Check their credit report
Check the debtor's credit report. A poor score is a red flag and suggests the customer has credit card debt, outstanding loans, or council tax arrears. Knowing their status can inform what you do next (i.e. whether you go straight to legal action or use softer approaches to encourage payment).
6. Maintain a professional tone
Avoid talking in a way that might make people argue. Firms should remain courteous and patient even if the debt is well overdue.
If you find this hard emotionally (because you run a small business), hand it over to Equisettle. Automated processes can avoid hurt feelings and increase the likelihood of getting paid, regardless of how much time transpired since you sent the original invoice.
7. Personalise communications
Talk to customers personally. Being on first-name terms can help make payments more likely. It can also help if you are compassionate and understand the situation from their perspective to find a win-win solution.
Equisettle's intelligent communication system personalizes messages based on customer behavior and response patterns while maintaining professional boundaries.
8. Use positive reinforcement
Incentivise clients to pay on time with discounts for early payment. Building healthy habits can reduce debt risk and prevent you from having to chase up your accounts receivables.
9. Gradually increase pressure until the final demand letter
Finally, start with gentle reminders signalling your intention to collect old debt owed. Increase the urgency of letters until reaching the "final demand," signifying possible legal action.
Equisettle automates this escalation process while simultaneously preparing legal documentation, ensuring a seamless transition to formal legal proceedings if needed.
Signs it's time to consider legal action
While the above tactics can be effective, they won't work for all clients. Sometimes, you need to take formal legal action.
With Equisettle, you don't have to go to debt collectors immediately. The platform works within the law to continue encouraging payments while preparing comprehensive legal documentation for court proceedings.
1. Ignored communications
Equisettle recommends considering legal action if clients are ignoring your communications. Such actions may indicate debtors are unwilling to pay what they owe intentionally.
Legal action may be necessary in this situation if the action is deliberate. For example, if a client is receiving and responding to regular emails but not those asking for payments, that could be grounds for escalation.
To resolve these situations, consider phoning the client and speaking to them on the phone. Ask them if they received the invoice and when they intend to pay. Then, write down the date they tell you. Ideally, it should be immediately if the request is overdue.
2. Disputed invoice
Equisettle also suggests considering legal action if customers dispute what they owe. Legal proceedings might be helpful in these situations, but not immediately.
Start by opening communication with the client to learn more about the reasons for the dispute. Usually, it will be a problem with the invoice itself (i.e. the figures are wrong) or related to your products and services.
If it is the first issue, change the details in the invoice (if you made the mistake) or explain to the client why the invoice is correct (and why their complaint is invalid).
If it is the second issue and there is a problem with your products, you may need to negotiate but be careful. Lowering your prices or offering a discount could be an admission of low standards.
If these strategies fail and the customer still doesn't pay, consider escalating to legal action. Equisettle can help prepare comprehensive legal documentation and provide seamless handover to legal professionals without using the aggressive tactics common in traditional debt collection.
3. Client financial difficulty
Finally, Equisettle recommends considering legal action when the client is facing financial difficulty. While you might sympathise with their hardship, you also need to protect your interests.
First, gather as much information as possible about the financial difficulties the client is facing. Find out if the customer has other lenders (if possible) and whether their original creditor sold the debt to another party now requesting payment.
Second, provide the customer with an alternative payment plan. Offer a discount for early settlement, taking their financial situation into account.
Finally, use legal action as a structured, professional approach. Consider using Equisettle's legal automation services to prepare statutory demands and court documents efficiently.
How Equisettle provides a better alternative to traditional debt collectors
Most businesses would prefer to avoid using debt collectors or a collection agency to collect outstanding debt. However, many believe they don't have a choice. Firms either pursue fees owed or write off debts and let their clients get away with not paying.
Fortunately, there is a third way with Equisettle. This platform combines intelligent debt collection automation with comprehensive legal document preparation, creating a complete debt recovery ecosystem.
Intelligent communication and legal preparation
Equisettle lets you inform customers of outstanding debts through letters, SMS, phone calls and email, with intelligent timing based on customer response analytics. The platform tracks communications while simultaneously preparing legal documents for potential court proceedings.
These tactics maintain a positive relationship with the client during the collection process while building a comprehensive legal case. It's an innovative approach that reduces the risk of needing external legal representation while keeping costs manageable.
Automated legal document generation
Unlike traditional debt collection agencies, Equisettle automatically generates legally compliant documents throughout the collection process:
- Debt validation letters with all required legal information
- Statutory demand preparation with auto-populated case details
- Court-ready documentation with complete audit trails
- Legal handover packages with full case histories for lawyers
Complete debt recovery ecosystem
Equisettle creates a seamless journey from initial invoice to legal resolution:
- Automated invoicing with intelligent payment reminders
- Multi-channel communication optimized for response rates
- Legal document preparation happening automatically in the background
- Seamless lawyer handover with complete case files when needed
- Court proceeding support with all documentation pre-prepared
Common concerns about debt collection (and how Equisettle is different)
Using a debt collection service doesn't always feel right. Sure, consumers owe you fees, but you don't want to do anything that might make them hostile to your enterprise.
This section addresses these issues and shows you how Equisettle solves them:
"I have a few eligible invoices, but I'm still unsure if legal action is the right approach"
- Equisettle emphasizes the long-term development of its users, taking a professional and data-driven approach to debt recovery
- Equisettle focuses on getting you paid while maintaining and protecting your customer relationships
- Equisettle provides transparent reporting on success rates and costs, helping you make informed decisions
"I want to pursue legal action, but I am worried about ruining my relationships with my clients"
- Equisettle implements intelligent strategies to minimize conflict and maximize the likelihood of getting paid
- The platform takes a systematic approach, eliminating the risk of emotionality souring relationships
- Equisettle doesn't use the harsh tactics of traditional debt collectors, preferring a professional legal approach
"My payments are too old to use legal action"
- Equisettle can help you claim any fees owed to you as long as it is not time-barred under the law (six years in the UK)
- The platform can prepare legal documentation for older payments using the same automated systems as newer ones
- Equisettle can apply legal pressure strategically through proper channels
"I want to pursue legal action, but it could damage my brand"
- Equisettle avoids the traditional harsh approach of debt collectors
- The platform implements a professional legal approach, ensuring full brand protection
- All communications and legal proceedings maintain professional standards
"I am worried legal action will be a time-consuming process"
- Equisettle offers a streamlined and automated service that handles legal document preparation automatically
- The platform puts legal processes on auto-pilot, letting you focus on your business
- Users save countless hours on legal administration that would normally require lawyer involvement
"Legal action isn't transparent and I won't know what's happening"
- Equisettle provides a comprehensive online portal, allowing you to track your cases and all legal documentation
- The platform shows you exactly what legal steps are being taken and when
- See case progress and legal milestones in real-time on the dashboard
"Legal action is ineffective because clients can't pay anyway"
- Equisettle avoids inflexible approaches, providing payment plan options even within legal proceedings
- The platform uses multiple legal channels to maximize recovery chances
- Flexible legal arrangements can help you recover fees without lengthy court battles
Getting started with Equisettle
The purpose of Equisettle is to help you spend less time on accounts receivables and legal administration while maximizing your debt recovery success. The platform monitors debt collections, prepares legal documentation, and helps you request repayment through various professional channels.
Try Equisettle to see how it could save you 20+ hours per week on debt collection and legal processes while getting your company paid faster. Get everything you need for complete debt recovery in one platform, from initial invoicing through to legal resolution.
Simply open an Equisettle account, sync your accounting systems, and start collecting with full legal backup. It's professional debt recovery made simple.
