“Conducting your credit control as if you were uninsured”. This is a key requirement Trade Credit Insurers expect of their clients in order to comply with their policy terms for a claim payment.
Appointment of a third party Business-to-Business debt collection company or solicitor is part of the prudent action Underwriters often require in order to pursue a ‘notable’ event, e.g. a positive legal outcome, insolvency of a company or verified ‘gone-away’, triggering the Underwriter to pay a claim.
Whilst a number of the Underwriters have their own internal collection department, allowing their policy holders to submit an outstanding for collection and/or claim, others don’t. So if your policy does not include collection services how do you go about choosing a company who are legitimate, will respect your relationship with your client and work in your best interest?
The Credit Services Association (CSA) offer the below guidance to help you make the right choice for your business:
- Is the company a member of the Credit Services Association? If they are you can be assured they will adhere to the CSA’s high ethical code of conduct
- Decide on the type of service you require, full collection service or ‘letter only’ fixed fee e.g. Letter Before Action? Often a letter from a third party will result in payment, without further action required
- The company should operate a ‘no win no fee’ charging structure for pre-legal action
- Be clear on the costs before employing. A commission rate is charged on monies recovered and the percentage will vary depending on age, geographical location and value of the debt. Legal action and costs are chargeable and make sure it is their policy not to engage in any action resulting in a cost, other than recovery commission, e.g. tracing or legal, without your agreement and estimation of costs
- Understand how they work and if it fits with your requirements. The company should be transparent, provide regular reporting, advise of costs and how they process monies recovered
- Where possible, select a company specialising in your market sector, this will be advantageous as they will understand the payment blockers and be best placed to resolve these. Alternatively seek a recommendation from other businesses in your industry sector
If you wish to find out more about how to use a B2B collection company to support your trade credit insurance policy or would just like to discuss your credit insurance options with one of our experienced brokers, please contact us.