How Using Commercial Collection Agencies Can Save Your Business
In these difficult economic times, effective collections can mean the difference between a successful business and a failure, but few small businesses consider the use of commercial collection agencies. Using commercial collection agencies may seem like an expense you can’t afford, but in the long run it pays off big time. Commercial debt collection simply gets you more money more quickly than you can accomplish on your own.
Commercial collection agencies handle the collections process quickly, effectively and professionally, freeing your employees up for business-growing tasks. Think about it-you would not ask your accountant to handle your company’s advertising, would you? So why should you require her or your salespeople to handle collections?
Once you’ve found a list of potential commercial collection agencies, it’s time to interview them regarding their success rate. It’s best to pick an agency with a higher success rate, and ask for documentation to prove their claims. An agency that charges 40% of returns as a fee but has a 75% success rate is preferable to one that charges 30% and has a 50% success rate, for example.
Commercial collection agencies have more clout with clients than in-house debt collectors as well. Chances are if your client isn’t paying on time, he or she has major cash flow problems and is playing triage with bills. The vendor who shows a serious commitment to debt collection by hiring commercial collection agencies is the vendor that will get paid first when there’s not enough money to go around.
You may have been hesitant to hire commercial collection agencies in the past due to the mistaken impression that it costs a lot, but most debt collectors take their fee as a percentage of the recovery. That means there’s no cost to you up front, and since commercial collection agencies have been proven to be much more effective than phone calls from in-house people, the recovery itself is likely to be much larger. For this reason, you’ll make more money in the long run by hiring a debt collector, even after you pay their fee.
Commercial collection agencies are experts at recovering receivables quickly. Studies have shown that once the collections process starts in earnest, people who are going to pay are most likely to pay within the first month. Having a persistent debt collector on the case greatly increases the chances of obtaining that money in the first month.
Another reason to choose a particular company among commercial collection agencies are value-added services. For example, skip traces, a service normally done by detective agencies in which they locate people who are trying to obscure their address, are also done by some collections agencies.
With all these arguments in their favor, the question should not be whether or not to use commercial collection agencies, but how soon can you get started? Commercial collection agencies can significantly improve your chances of recovering bad debt at no upfront cost and little ultimate cost. For the small business owner who relies on positive cash flow, commercial debt collection can be a life saver.
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