Collection Agencies - Choosing the Right One for Your Company

on 11/14/2014 - 01:45 pm

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.

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