Is your business team struggling to collect past due payments from debtors? Are you looking to hire a debt collection agency or work with debt buyers? As you dig into both options, you might not be sure about the differences and benefits of each. Let’s see what could work best for your business to increase cash flow now.
Collection of Bad Debt
Let’s start with the difference of each. To begin, debt collectors do not own the debt. Therefore, the original creditor (you) is still in the picture when it comes to settlement or payment plan approvals. Debt collection agencies that recovery past due payments for your business will charge a small fee for doing so.
Meanwhile, debt buyers purchase your business’s debt for a fraction of the original amount owed. Debt buyers do not have to seek authorization from the original creditor (you) on the path of resolving the debt collections. While you will not retrieve the entire debt owed to you, this could be the best or fastest solution. Depending on other things your business is dealing with, you may just want someone else to completely rid you of this problem. Although, it will cost you.
Some companies prefer to work with debt buyers because they are now released from dealing with those late payments and collect some money immediately regardless of whether the buyer is later successful. However, debt buyers usually only pay cents on the dollar for the debt owed, meaning you’ll receive far less. Furthermore, your company has no control over the debt buyer’s methods or representation of you.
Both debt collectors and buyers are third-party companies that help other companies recover outstanding debt from customers with past due accounts or payments. An agency will reach out to your customers on your behalf. This is either in place of your AR team or as extra help for bills that reach a certain level of lateness.
Calling a debt collector or buyer is useful for businesses after their payment team has tried notifications, calls, emails, and letters without success.
Debt Collection Agency
The older the debt, the more difficult it is to collect, so fair debt collection services often work with companies to get payments on debts 90 days or older.
A reputable collection agency will have tools and resources that most small businesses (and even many mid-sized ones) don’t. Under legal action and guidelines, third-party agencies collect debt recovery through a variety of methods, most commonly skip tracing. Most importantly, any credible commercial collections agency or debt buyer will be certified. Plus, always ask for some proof that they follow the Fair Debt Collection Practices Act.
Collecting debt can work within any industry restrictions or your preferred collection approaches, even with credit cards. While there is a cost to hiring a third-party collection team, it’s usually better to obtain a portion of the debt owed. As stated, many debt collection agencies, including Capital Recovery, work on a contingency fee. Therefore, they return payments to you minus a small fee for the service.
According to the ACA, the portion of debt collection activities industries outsource to third-party debt collection agencies is as follows:
Healthcare: 37.9%
Student Loans: 25.2%
Financial Services: 12.9%
Government: 10.1%
Retail: 3.1%
Telecom: 3.2%
Utility: 2.2%
Mortgage: 2.0%
Other: 4.7%
Hire a debt collection agency that is skilled in the area of your business or corporation. For example, Capital Recovery Corporation has decades of experience with commercial and healthcare AR management, along with insurance overpayment recovery.
Commercial Collection Agency
Does your business need help collecting old payments? Would you like you and your staff to spend time on more important things? Learn what to look for when looking to hire a debt collection agency.
Contact Capital Recovery to get started with the most trusted commercial collection agency.