Businesss debt outsourced for collection exceeds £1 billion
Proof that businesses are finding it increasingly difficult to collect their cash is provided in new statistics - published for the first time - from the Credit Services Association (CSA), the industry body representing the UK debt collection industry.
At the end of September 2012 (Q3), the amount outsourced by businesses to third-party debt collection agencies stood at £1.145 billion, an increase of 12 percent on the previous Quarter (£1.021 billion) and more than £216 million higher than the figure recorded at the end of 2011 (£0.928 billion).
The volume (ie number) of debts had also increased from 595,901 in Q2 to 616,078 in Q3, a comparatively modest increase of three percent that still suggests that the size of individual debts is increasing.
Michelle Moore, B2B Collections Portfolio Director for the CSA says that the rise in volumes and values shows that more businesses are turning to third parties to recover cash that is rightfully theirs: “What seems clear from these figures is that businesses are increasingly seeing the use of third-parties not as a failure on their own part to collect the cash, but rather as an integral part of their credit management strategy.”
Michelle believes that businesses are no longer convinced of the argument that using a third party impacts on the ongoing business relationship: “The only good customer is a paying customer,” she says, “and while there is a perception that using a third party can impact future trade, the reality is somewhat different.”
The Government through the Department for Business Innovation and Skills (BIS) has been especially vocal recently regarding the issue of late payment, and convincing big businesses of the importance of signing up to the voluntary Prompt Payment Code (PPC).
“There comes a point when a late payment turns into a potentially toxic bad debt, and that is when an external debt collection agency is at its most effective,” Michelle adds. “Outsourcing debts to a third party tends to make those debts more ‘serious’ and are often satisfied more speedily than when a company is chasing overdues themselves.”
Elsewhere, the CSA has reported a further rise in both the value and volume of consumer debts being passed to Debt Collection Agencies (DCAs) or sold to Debt Buyers for collection. As at the end of September 2012, the total now stands at £62 billion, a rise of four percent from the previous Quarter (Q2) and an increase of 14 percent year-on-year.
The number/volume of debt has also increased, albeit marginally. The total number of debts awaiting collection stands at 33.2 million from 32.4 million in the previous Quarter and 31.8 million in Quarter 1. The average individual account balance, however, has fallen by more than £150 from £1,189 at the end of Q2 2012 to £1,036 at the end of Q3.
The statistics provide a mixed picture, according to Sara de Tute, CSA President: “Although the figures have remained relatively stable Quarter on Quarter, both the volumes and values are significantly increased compared to the same period a year ago, and that is a concern. There is anecdotal evidence from our members, however, that consumers are increasingly looking to pay their debts down ahead of Christmas, and this may account for the drop in the average account balance.”
The Credit Services Association Ltd (CSA) is the only National Association in the UK for companies active in the collections industry and incorporates a specialist group for companies involved in the sale and purchase of debt; the Debt Buyers and Sellers Group (DBSG). The Association has a history dating back to 1902 and has in excess of 400 members (of whom c25% are in B2B) who represent more than 90% of the industry. Further information on the CSA can be found at: http://www.csa-uk.com
Source - Credit Services Association press release
Read more at www.csa-uk.com