When Should You Hire a Collection Agency?
Businesses are often reluctant to hire a collection agency. They worry that sending a client to collections will permanently damage their relationship with the client. Or they think they will harm their own reputation.
In fact, though, hiring a professional collection agency is one of the best ways to preserve your reputation. Not only that, but you’ll also safeguard your relationships, not to mention your financial health.
A good collection agent knows not only the relevant laws, but also tips and techniques. This person will help you to collect money from an overdue client. They might even be able to help you keep that client. However, it takes a certain amount of skill and expertise to do that.
Below, we discuss some of the situations in which you should definitely call upon the services of a collection agency.
Outsource Your Debt Collections When a Bill Is 90 Days Overdue
Experts recommend that you outsource certain services and functions, rather than do them in house. When you read articles describing which functions can be outsourced, you’ll see that debt collection falls into this category.
If your business does not have a staff dedicated to credit management and in-house collecting, you will likely need to hire a collection agency when customers are 90 days or more behind on paying. Studies show that after 90 days, the chances of a debtor paying a bill decrease dramatically.
If you have very few employees, it does not make sense to direct a large amount of your workforce’s time toward making collection calls. In addition, it is highly unlikely that an employee without training to make collection calls will be successful at collecting unpaid balances.
Most reputable commercial collection agencies work on a contingency basis. That is, you only pay them if they are successful. So, although you may not keep every dime you are owed, you will very likely receive a larger percentage than if you tried to collect that debt on your own.
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Hire an Agency for Delicate or Complicated Debts
If an account is just too tricky for your credit department to collect, you may well need the services of a collection agency. This is true even if it has been fewer than 90 days since your customer’s last payment.
A tricky account might be one that involves a business that has closed or a business that has declared bankruptcy. Additionally, if the debt involves a dispute, or if a business in another state owes the bill, you probably need a collection agency.
Other troubling signs include a debtor who seems to have disappeared without formally declaring bankruptcy or closing the account. In such cases, experts strongly recommend that you send such accounts to a collection agency. Debt collectors have extensive resources available to help them track down debtors who have gone into hiding to avoid paying their debts. They are much more likely to find a missing debtor than a company’s credit department. Once they have found the person, they will know how to legally apply pressure to the debtor to ensure payment.
When in Doubt, Hire an Agency
If you are unsure whether or not a client is about to default on a debt, or should be sent to collections, it may be helpful to review the warning signs that a company is in trouble. Issues of debt and money can be emotional as well as financial. Trained professionals can help you to deal with overdue or difficult accounts. Moreover, hiring a collection agency is a safe and effective way to deal with them.