Reasons to Hire a Debt Collection Agency
There are several reasons to use a collection agency when you are unable to collect past-due debts from your clients. As a business owner, you don’t have the time to track down debtors and continue following up with phone calls when bills remain unpaid. While some businesses have internal collection agencies, it may be time to go to a third-party collection agency when debts become overwhelming.
The Benefits of Working with a Debt Collection Agency
Successful Debt Recovery
For Debt Collection Agencies, recovering debt is what we do best. As a result, not only are third-party collection agents trained professionals in the best techniques to successfully achieve debt recovery, but to many debtors, a collection agency poses a much greater threat than the business itself. For example, debt collection agencies can negatively impact a debtor’s credit score for up to seven years. The threat of this alone is often enough for people to set up payment plans.
Debt collectors are trained in professional collection techniques and know-how to get through to debtors. Debt collectors also know how to use collection laws to their advantage, protecting you from legal fallout and better ensuring that debtors can’t try and use collection attempts against you or your business.
Internal employees may not have the skills or specialized knowledge to do proper debt collection, which involves not just making phone calls, but knowing when to call, what letters to send, what protocols to follow, and what legal options to explore. Rather than having employees do a job outside their areas of expertise, a debt collection agency may be a more profitable option.
Not only are people more apt to pay when approached by a collection agency, but they also tend to pay faster. This is because most people have an idea of debt collection firms in their heads. Although this reputation may sometimes be on the negative side, it can also come with an advantage.
People tend to sit up straighter when receiving a phone call or letter from a professional debt collector. It’s like a powerful wake-up call to clients, showing them that you are indeed serious about your intention to recover the money owed to your business. It tells debtors that you are not just about to forget or write off the unpaid invoice.
This added sense of urgency that debt collection firms provide motivates people to act more quickly in settling their overdue accounts.
Takes The Burden Off Your Business
The work required to collect an outstanding debt is complicated and time-consuming. As a result, calling delinquent customers yourself or assigning a staff member to do so can eat the day away.
By hiring a third-party collection agency, not only will the likelihood of successful debt recovery be increased, however, you’ll now be able to dedicate all your time and efforts to where it’s needed most, your business.
Debt Recovery Tools & Methods
Another benefit of hiring third-party debt collectors is the access to a wide variety of tools and strategies that help make the recovery process more efficient. For instance, when a customer severs all contact with your company—their phone is disconnected and they left no forwarding address—debt collection firms as Fair Capital can help you track down that client using skip tracing. Skip tracing is the process of locating a debtor who has “skipped” or left town, hence the name “skip tracing.”
In addition, as a collection agency, we have access to public records databases, credit reporting devices, and other such resources that can help you find a client. This way, you can obtain updated contact details and move closer to resolving the outstanding account.
Protection From Lawsuit
In the debt collection world, many state and federal laws govern the way debt can be collected. Unfortunately, these laws are often not well known by business owners, reaching out to their debtors, resulting in numerous potential legal issues.
Using a debt collection agency familiar with these laws could therefore protect you and your business by eliminating the legal risks posed when you endeavor to collect debts on your own.
Everything Is Documented
One strategy that professional debt collectors utilize that may differ from that of a business owner in collecting debt is the practice of record keeping.
Debt collectors document every attempt made to collect a debt, making it easier for you to demonstrate said to a court, should you in the future sue a debtor or for tax purposes should you claim bad debt as a tax deduction.