The benefits of using collection services
Businesses are in business to make money, so when a client or customer owes, it's important that the debt is collected. Unfortunately, collecting a debt isn't always as simple as sending a bill or making a reminder call. Debt collection requires a blend of tenacity and patience, and chasing after outstanding debts can eat up valuable time and resources. That's why many businesses turn to debt collection agencies to perform this task.
A debt collection agency is essentially a company that contacts debtors on behalf of their creditors and attempts to collect the debt. In most cases, these companies get paid by keeping a percentage of each debt they collect; however, some collection services actually buy debts outright (usually for a fraction of the actual amount owed) and then keep what they collect, sometimes including interest.
Although outsourcing debt collection usually means forfeiting a portion of what is owed, most companies still find it to be the most cost-effective method for getting paid. Often, the amount paid to a debt collection service is less than the cost of the employees and resources required to collect the debt themselves.
How to Choose a Debt Collection Service
When you're looking for a collection agency to work with, remember that it will be representing your business, and debtors may assume that the debt collectors they talk to are your employees. Be sure the employees are professional and comply with the Fair Debt Collection Practices Act (FDCPA), which governs debt collection in most of the U.S. Failure to comply with the FDCPA may result in fines and, in extreme cases, even criminal charges, and you don't want your company name associated with that.
Other considerations to make when choosing a debt collection service are the type, number and value of the debts you need collected. Some collection agencies specialize in collecting business debts or very large debts, while others specialize in collecting smaller debts from individuals. There are also agencies that focus on long overdue debts and can track down debtors for whom your contact information is no longer current.
Finally, make sure the service you choose has an open communication policy. You'll want to be kept apprised of their progress, and more importantly, you'll want to be certain that anything they send or say to clients meets with your approval and represents your company as polite, professional and fair.
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