Should I Use a Debt Collection Agency?
Are you trying to decide whether or not to use a debt collection agency? Here is our business buyer’s guide to debt collection.
It’s tough out there for small businesses. You have to contend with increased competition, digitalization, and rising high street prices, and that’s before you consider overdue invoice payments.
In the US, small businesses are owed an average of $84,000 in goods delivered but not paid for. No wonder business buyers are finding it harder than ever to make their dream a success.
If unpaid invoices are affecting your livelihood, it’s time to draft in the professionals. Stop spending time chasing time wasters and leave it to a debt collection agency. They’ll help you get your funds, so that can focus on what matters most: growing your business.
What is a Debt Collection Agency?
When handled well, debt collection doesn’t have to be confrontational. A good debt collection agency will work with your debtors to help strengthen your business relationships and prevent payment issues from reoccurring.
Not only is this better for your business finances, as you’ll avoid the stress of heading to court, but it’s better for your wellbeing. Unresolved financial pressures at work cause immense stress, which in turn impacts your emotional and physical health.
How Does Debt Collection Work?
Small business debt collection agencies act as middlemen, collecting customer payments that are past an agreed payment term and remitting them to the business. You can choose from several services dedicated to smaller businesses. These include:
- Single Debt Recovery, a one-off service that helps recover an individual fee that is exceptionally late or high value for a single, success-based fee
- Multiple Debt Recovery, to recovery a large number of owed invoices or all invoices that reach a certain age
- Corporate Debt Recover, comprehensive recovery plans that provide for an ongoing partnership with your chosen agency
- Debtor Tracing, which helps you check the health of those you are offering credit too
If you’re unsure of which service is best for your business, the best debt collection agencies offer free consultations to discuss your needs in more depth. It can also help to consider the severity and duration of the cases you need to recover. If a case is complex, finding a firm with an in-house debt collection lawyer will offer an advantage should you need to attend court.
How are Debts Recovered?
Debt collection agencies will recover overdue funds fairly and safely. The Fair Debt Collection Act ensures that consumers are protected from harmful practices, such as deceit (i.e. a debt collector claiming to be an attorney) or threatening arrest. Instead, the following steps are generally taken:
- Send a letter stating the value of the debt, the payment term, the name of the creditor, and the debtor’s rights
- If the debt is still not settled, the agency will call the debtor to ensure they are aware of the notice. Many calls can be received in one day
- Finally, in-person visits will begin to ensure the funds are recovered.
If you are concerned about fair debt collection practices, ask your collection agency how they follow The Fair Debt Collection Act. Choosing a partner who strictly adheres to its regulations will ensure the integrity and reputation of your business isn’t affected by your debt disputes.
Benefits of Using a Debt Collection Agency
- Recovers funds safely: minimize potential conflict by leaving it to the professionals
- Higher chance of success: the presence of a debt collection agency forces debtors to take the issue seriously
- Saves you time: debt collectors have the experience, methods, and personnel needed to recover debts quickly
- No win no fee: lots of agencies will only charge if they recover outstanding payments
- Clear Records: third party documentation from the agency ensures you have all the information you need should you be to attend court
- Less stress: handling unpaid debts alongside running your business burdens you with high levels of stress
Above all else, an experienced debt collection agency will safely recover your lost debts. Trying to handle it yourself could escalate the issue, turning an outstanding payment into an ongoing, business damaging conflict. Avoid the hassle and let a professional defuse the situation for you.
How Much Does Debt Collection Cost?
The cost of debt collection depends on the number of outstanding invoices you need to resolve and how difficult they will be to recover. Typically, debt collection companies charge the creditor a percentage of the amount collected. And this can range between 25% to 50%.
However, your fee could be increased if your case becomes more complicated. For example, if your debtor has gone off the grid and needs tracking down, your fees will reflect the additional work. Similarly, if the other party disputes your claim your fee could be revised to include the cost of an attorney.
Like any other professional service, the best approach is to compare several debt collection agencies to make sure you pay a fair rate.
Business Buyers: Do You Need Help Finding the Best Debt Collection Agency?
Buying a business is stressful enough, without needing to waste time researching lawyers, accountants, debt collectors, and any other professional services you need to outsource. That’s why business buyers turn to Price it There to compare the services they need.
If you need to find the best debt collection agency for your business. Let us do the hard work and compare for you. Get started today.