A recent survey has revealed that the debt collection industry is facing a “perfect storm” due to outdated methods of collection utilised by some debt collection agencies.
These findings were made in a survey by Sopra Group Solutions, an IT firm. They concluded that the debt collection industry faces heightened pressures on recovery rates coupled with an increasingly failing debt recovery infrastructure, and expectations of a huge hike in the number of debt recovery cases.
Elliott Howard, director at Sopra Software Solutions in the UK, said:
“The challenge businesses face with debt collection is immense, and the debt collection situation is rapidly worsening. Debt collection is absorbing more resources and increasingly becoming more complex and difficult to collect. Added to this, the number of debt collection cases is set to increase at an alarming rate.”
The survey also revealed that the process of collecting money is becoming slower, less successful and more resource-intensive.
This is expected to worsen, with survey respondents anticipating a 20% increase in debt collection cases in the next year, while 43% of respondents expect the volume to be over 20%.
One survey respondent summed up the problem by saying:
“Increasingly, there are more debt cases that cannot pay, rather than simply won’t pay.”
And to back this up, 85% of respondents agreed debt is taking more people/resources to collect, while 83% confirm debt is costing companies more than ever before.
Meanwhile, 81% agree costs are escalating because debt collection is taking longer, while 74% confirmed that margins are being impacted due to extended payment timeframes.
Mr Howard added:
“It’s a grim outlook for the debt collection industry unless some radical process overhaul and technology spend is set in motion. Otherwise, business debt will become unmanageable.”