Hiring a Small Business Collection Agency for Unpaid Bills
Businesses of all sizes grapple with unpaid customer bills, and this problem intensifies with an economic slowdown. Not getting paid can hurt profit margins dearly.
By LEO GIOSUÈBusiness solution(photo credit: INGIMAGE)
Businesses of all sizes grapple with unpaid customer bills, and this problem intensifies when there is an economic slowdown. Not getting paid after delivering your product or service can hurt profit margins dearly. Your employees are likely not trained enough on how to work efficiently with past-due bills, moreover pulling them off from their primary responsibility and turning them part-time debt collectors can be very frustrating.Debt collection agencies have been serving businesses for decades, recovering billions of dollars each year that their clients could not collect themself. They serve both large corporations and small businesses and protect their legal right to get paid. Each state in the US has a different set of debt collection laws. Many states enforce these laws on original creditors too. Violating these debt recovery laws can result in penalties and in some cases, can lead to a lawsuit initiated by your debtor on you. America is the land of lawsuits, sometimes rightful and sometimes frivolous. This problem is particularly intense in the healthcare industry to the extent that medical professionals like doctors, veterinarians, dentists, and physiotherapists buy medical malpractice insurance for their protection. They hire a medical collection agency to recover money from patients which their staff could not collect on time. Transferring accounts for collections that have been due for over 90 days is a standard practice in the healthcare industry. Small businesses can have B2B and B2C debts. The methodology from collecting bills from consumers is totally different from a company. A consumer collection agency will typically offer flat-fee written demands or contingency based collection calls service. For commercial debts, the recovery is made using collection calls or by taking legal action. Commercial collections (B2B) are almost always contingency based with fees ranging from 20% to 50%. In most cases, a commercial collection agency will be able to deliver a recovery rate of over 60% on viable debts. Consumer collections (B2C), on the other hand, have a recovery rate of about 30% on viable claims.While selecting a collection agency, the biggest mistake small businesses do is to hire an agency that is closer to them or offer the cheapest rates. Firstly, the location of a collection agency does not matter. Secondly, the collection agency charging rock bottom fees will likely have inexperienced or underperforming debt collectors. Good debt collectors do not charge a lower fee, and eventually, how much a collection agency collects matters the most. For example, if you assign an amount due of $20,000 to a collection agency charging 40% contingency fees and they are able to recover $10,000, then you will get $6,000 in your pocket. Another collection agency charging 30% contingency fees may recover a lot less. Let's assume they are able to recover only $7,000 then you get $4,900 back. In the debt collection industry, you generally get what you pay for. Rouge and inexperienced debt collectors can damage your reputation.A small business debt collection agency will also run various checks on all your debtors, this includes Skip tracing, Bankruptcy check, and Litigious customer check on all accounts assigned to help them improve their recovery rate.Without collection agencies, billions of dollars on business invoices will remain unpaid, leading to massive losses and layoffs. The role of collection agencies in the business ecosystem is undoubtedly very crucial. Debt collectors are required to work amicably and diplomatically by law. It is always advisable to hire a collection agency with the license to collect in all 50 states. If your debtor relocated to a different state, the same collection agency would continue to work for you.There are over 5000 collection agencies in the USA. It is essential to select an agency that is FDCPA and HIPAA complaint. They should also have a low complaint rate and higher BBB reviews. If you need to find a good collection agency, talk to your doctor or dentist, chances are they are already using one and may be able to recommend you to them.
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