The economic downturn and the continuing recession are spurring bad debt. Debtors refuse to pay and businesses are left holding inactive past customers. This has blocked the funds flow that businesses are so dependent on. Many companies have tried collecting bad debts but with marginal and rare success. That’s because they neither possess business debt collection experience, nor can they tap into excellent investigative sources. This is why businesses must rely on commercial collection agencies.
Using collection agencies helps businesses collect bad debts, returning a modicum of the positive cash balance. Several reasons can be cited for hiring collection agencies to collect business debt:
1. Time, expertise, and access to skilled manpower are required to pursue bad debt, all resources not typically held by any business. Also, collection attempts run the risk of incurring an expensive law suit that can end up costing far more than the actual debt they expected to collect. Outsourcing business debt collection to an agency allows businesses to avoid all such risk.
2. Utilizing the skills and experience of their employees, collecting agencies investigate the defaulter’s assets, digging into financial information such as net worth to determine the debtor’s ability to pay. This information is helpful in persuading the defaulter to repair the debt.
3. Credit collection agencies are networked with reputed private investigators, who they hire to keep tabs on defaulters. If a defaulter moves house or “skips” to another state, it can become very difficult and cumbersome for the business to trace him out. This task is easily handled by agencies whose private investigator network traces defaulters and even finds out about their latest financial information.
4. A defaulter knows that he will be chased by a business and so he may switch phones or refuse to answer calls or throw letters in the junk box or evade personal meetings. A business cannot keep chasing a bad debtor forever and sooner or later it gives up after wasting a considerable sum of money. If it were to hire a commercial credit agency, then it would be a different story. Collection agencies send experienced agents to meet the defaulter at home or his business or in his new place of work. Such personal meetings can motivate the defaulter to pay up.
5. Collection agencies charge a mixture of fees, both variable and flat. Flat rates are applied to legwork and investigative work, while variable rates are based on a percentage of the actual debt. For example, an agency might charge 15% of the actual amount collected. In addition, most agencies have a ‘no collection, no fee’ policy, which adds to savings a business will get from the process.
Business Debt collection is a serious business that requires a large network and special negotiation skills and most businesses do not have it in them to chase debtors. They would rather focus on their business and on generating revenues rather than waste time and run the risk of being unnecessarily sued. So, business debt collection requires experience and skills and so it is best that it is left to a commercial collection agency. Moreover, the success rate and low fees charged by these agencies ensure a win-win scenario for the business owner.
Next, discover more important information and resources about commercial collection agencies, business debt collection in addition to collection agencies solutions.