Cash Flow Credit Management Debt Collection
3 mins read

Choosing a debt collection strategy

debt collection

Most businesses have to chase debtors at one time or another, so a debt collection strategy will go a long way in helping to recover monies owed.

Do you have a debt collection strategy? Do you know when it’s best to handle collections in-house or when it makes more sense to hire a third party? Most businesses have to deal with delinquent accounts from time to time. How you manage your collections can make a big difference to your cash flow, both positive and negative. Different circumstances call for different solutions.

In-house debt collection

An in-house collection strategy can be your most cost-effective method as long as you have three things in place.

  1. your business has a clearly defined credit policy
  2. your customers are made aware of your policy at the time of purchase
  3. you are willing to take immediate action against your debtors.

This last point is particularly important. The sooner you begin the collection process, the more funds you’re likely to recover.

Preserving customer relations

Managers performing their own debt collections must walk a fine line between maintaining good relations with the customer and recovering the money rightfully owed. Depending on the reason for non-payment, your customer may be feeling humiliated, defensive or even aggressive. It’s not uncommon for business owners to feel embarrassed about asking for payment. If the subject of unpaid invoices makes you uncomfortable, it’s probably best to let a third-party agent handle it for you.

TIP: Your collection staff must have the appropriate training to manage an uncomfortable conversation, negotiate terms and keep on track without getting distracted by the debtor. They must be trained to manage aggressive and emotional people.

Consumer protection laws

Another consideration for business owners planning to perform their own debt collections is whether they can comply with consumer protection laws. Your staff must operate within the guidelines defined by ASIC and the ACCC.

TIP: Your debt collection staff must keep copious notes of every conversation, letter and electronic communication with the debtor. This is especially important if the debt is subject to future legal action.


Lastly, in-house debt collectors should have excellent negotiation skills. Not only will they be responsible for maximising the recovery of each debt, they’ll also be working with the owners of delinquent accounts to set up repayment schedules. You want those outcomes to be as favourable towards your business as possible. For many businesses, the cost of finding qualified staff and keeping them trained is a bigger investment than hiring a debt collection agency when the need arises.

Third Party Collection Agent

A third party collection agent has an advantage in recovering your outstanding debt—because there’s no client relationship, they can be more assertive in pursuing payment. While you should expect nothing but complete professionalism from an agent, you also don’t have to worry about an emotional attachment to the situation. This can be highly beneficial if there is a dispute over the unpaid bill.

Power of objectivity

A professional debt collector often provides your debtor with a sense of relief. They don’t have to deal with someone they know and can avoid embarrassment or humiliation if they are having trouble paying their debts. For this reason, debt collection agents can often discover the real reason for non-payment. Once the truth about the debt is on the table, better decisions can be made about recovery.

Tough debtors

If your staff have encountered a debt that’s proven difficult to collect, it’s probably best to turn the case over to a third party. Professional collection agents are experienced in dealing with tough debtors or debtors who have a history of avoiding payment. Many of these people are expert negotiators and may have a strategy to accumulate debt that can be reduced through negotiation. While it might seem like a lot of trouble for a discount, be assured debt collectors deal with these characters every day.

Old debts

For debtors that seem to have disappeared, a third party collection agent will have access to many techniques to locate them, including skip tracing software. They will also have expertise in managing debts that have been delinquent for an extended period of time.

More resources

A debt collection agency gears its business towards one thing: recovering money owed to you. Because this is their sole focus, all their company resources and investments are geared towards improving this outcome for their clients. Debt collection is not an additional staff function or even another department; it’s their entire business.

What this means for business owners

Managing your collections internally might make sense if you’re prepared to invest in staff training and aren’t worried about negatively impacting customer relations. On the other hand, a third party collection agent can bring objectivity to the process and result in your money being recovered faster.

Natalie Walker
Natalie Walker is managing director of Blitz Credit Management (, a technology-driven debt collection agency based in Australia. Her modern approach to debt collection and credit management services has been widely embraced by Australian businesses. She can be contacted on (08) 6140 2584.

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