Collection Agencies - Choosing the Right One for Your Company
Minimizing the amount of bad debt that you accumulate is critical for your company's financial
stability, so you need make sure that your accounts receivable department utilizes a variety of
proven payment collection techniques. In some instances, it will become necessary to use the
services of a collection agency, especially if someone owes you a lot of money.
However, the specific collection agency that you choose will serve as a reflection of your
business, and this means that it is imperative for you to make an informed decision instead of
selecting the first agency that approaches you.
How Do Collection Agencies Work?
When you have determined that it no longer makes good financial sense for your employees
to continuously attempt to collect a debt, you can turn over this past due amount to an
experienced collection agency. The agency's representatives will utilize a variety of techniques
to contact the individual who owes you money, and it is possible that they will eventually file a
lawsuit on your behalf.
Most collection agencies retain a fee of 50 percent for everything they collect. In other words,
if someone owes you $1,500, you will be eligible for a $750 payment from the collection agency
if they are able to collect the entire amount. Keep in mind that it is common for these agencies
to offer a discounted rate to the person in debt because it makes more sense to collect a
smaller amount than nothing at all. This is the same thought process that causes companies
to turn over bad debt to collection agencies in the first place. After all, it is not a good use of
your employees' time to spend the next several years continuously contacting someone who
defaulted on a payment.
How Can a Collection Agency Become a Bad Reflection on My Business?
It is well-known that some collection agencies use harassment and even illegal tactics in an
attempt to force people into making a payment. Although this might end up gaining you a
portion of the past due debt, it could also seriously damage your company's reputation. Be sure
to investigate an agency you are considering using as a collection arm for your firm.
It might seem illogical for people who do not pay their bills to be able to have a large influence
over those who do, but you need to remember the fact that everyone should always be treated
fairly. Additionally, someone who is having financial difficulties today could very easily end up
in a much better position in a few years. Choosing the wrong collection agency will keep them
from ever becoming a paying customer again, and it could also lead to a lot of negative online
How Can I Reduce Bad Debt?
You can reduce the amount of bad debt that you accrue and eventually send to a collection
agency by being proactive. For example, it is best to schedule a courtesy text or email for each
of your customers that goes out 24 hours before their payment is due. If a payment is missed,
you should begin making contact via phone, email and surface mail immediately.
Make sure that you encourage people to contact you to make payment arrangements before
the debt is sent to a collection agency. It is also imperative to run any applicable credit checks
before you begin working with a new customer so that you can minimize your risk.
No matter how careful you are, there will be some instances when your customers simply do
not pay for the products or services that you have provided. Having a high quality collection
agency on your side that has a solid reputation and does not employ illegal scare tactics will
make it possible for you to get at least some of the outstanding amount so that you do not end
up having to write off an exorbitant amount of money.