A collection agency offers services to lenders and creditors so they can recover funds that are past due or in default. Usually, a creditor hires a collection agency after it has made several failed attempts to collect a debt.
Why use a collection agency?
You’re focused on your business. Collections aren’t your core competency. You likely outsource other types of services that aren’t in your wheelhouse for reasons of time and focus. Why would you spend time and resources tracking down unpaid clients and debts?
Not only does using a collection agency free you to pursue the core of your business, it also provides significant other benefits as well:
- Documentation: Collection agencies record each step of the collection process. Should you find yourself forced to sue the debtor, you have thorough documentation of the collection agency’s attempts to retrieve the debt.
- Successful debt collection: Like you, collection agencies focus on their core competencies and services, all of which are around collecting debt. It’s not surprising that their experience and professionalism results in a higher success rate when collecting past due debts.
- Faster payment: People more apt to pay when approached by a collection agency, but they also tend to pay faster when approached by a collection agency, as they realize that their credit score may be affected. This prompts faster response.
When is it time to hire a collection agency?
- When you want to reduce legal risk. Every state has its own laws that govern debt collections. Most educated customers know how to take business owners and the debt collection agency to court if their rights are violated. Debt collectors are knowledgeable and well-informed about the laws that govern the collection process.
- To put the odds in your favor. Collections specialists have experience in collecting debts and are successful at doing so. You’re committed to running your business. A collection agency is committed to collecting debts. They are professional and are knowledgeable of the best tactics to lawfully convince a debtor to pay.
- When you need financial and program flexibility. Most collection agencies will have a program that works well with your business model. Some debt collection agencies pursue debtors without a fee. Others receive a commission on the amount they successfully recover. When you engage a collections agency, find out what programs they offer. This will help you find the correct agency that works with your business model and financial needs.