Large And Small Businesses Can Utilize A Commercial Collection Agency

Regardless of the size of a business, cash flow and profits are the governing criteria in whether or not the business remains a viable entity. Where having a handful of delinquent accounts might not hurt a large company too much, those same accounts could wreak havoc on a small business, not only in loss of revenue, but in the cost of the collection process itself.

The use of a professional collection agency is the best answer for a number of reasons. A hallmark of any good business is the way customer relations are handled. By distancing debt collection from the company to a first or third-party service, a positive relationship will be maintained. Having an outside agency doing debt collection will also ensure that follow-up and further reporting to credit bureaus is done in a timely manner, if necessary. Using a commercial debt collection agency will ensure that professionalism and experience is present in the debt collection process. These companies have experienced collectors and attorneys handling your accounts, as opposed to some companies using part-time people with little or no experience in the field.

In general, there are three types of collection agencies. The first, called a first-party collection service is often a subsidiary of the mother company the debt is owed to. The next one is referred to as a third-party agency. This company is a separate business, contracted to collect debts on a company's behalf for a fee. The last type of agency is known as a debt-buyer. These companies will buy a debt from businesses for a percentage of its value and try to collect it. Debt-buyers are probably the most regulated of the debt collection agencies, and are not allowed in some states.

There are some steps that must be taken when choosing a debt collection agency. First, make sure they are licensed, bonded, and insured. This will cover your business if the collection agency is involved in a lawsuit, or does something that is in violation of state laws. Ask about the fee. Some collection companies work on a percentage, while others have a "flat fee." Decide on which is the better option for your company. Many collection companies offer a tool called "debt portfolio screening." By using scoring software, the collection agency can monitor the delinquent accounts, determining which accounts will be more likely to be resolved in a timely manner. Find out too, if you will be allowed to monitor your account online. This will enable you to keep up to date with your debtors. And lastly, ask if the collection company has a protocol for determining the type of account to pursue collection on.

When putting a delinquent account up for collection, various factors come into play. The age of the debt is important. How long has it gone without payment? What kind of debt is involved? Determine if it is a one-time transaction, or if it is a long-time customer that has suddenly gotten into trouble. Look at the balance owed on the account. It is sometimes easier to charge-off an account rather than send it for collection, especially when cost of collection is taken into consideration.