No matter what the size of your business is, positive cash flow is a crucial element, which means that collections should be one of your top priorities. At the same time, collections is a process that makes a lot of people uneasy, meaning that they sometimes procrastinate on doing it in favor of other, more pleasant duties. For many businesses, employing commercial collection agencies is the answer.
You may be wondering how to go about finding the right one among tons of commercial collection agencies, though. The first step is to investigate agencies to make a list of those who accept payment as a percentage of the recovery they achieve. So many commercial collection agencies do this that there is no reason to hire one who requires upfront payment. If they are confident in their abilities at commercial debt collection, they will be content with taking their fees when they’re successful.
Once you’ve found a list of potential commercial collection agencies, it’s time to interview them regarding their success rate. It’s best to pick an agency with a higher success rate, and ask for documentation to prove their claims. An agency that charges 40% of returns as a fee but has a 75% success rate is preferable to one that charges 30% and has a 50% success rate, for example.
When you have a number of agencies who have acceptable fees and success rates, there are still other questions to ask. You want to pick commercial collection agencies that match your industry, for example. If your clients are all Fortune 500 companies, the debt collector that specializes in individual consumers is not going to be the right match for you. You need a debt collector whose strategies meet your needs.
Commercial collection agencies also successfully recover the bulk of their receivables in three weeks or less. We all know in business that time is money, and getting that money quickly helps both your cash flow and your credit score. In addition, the longer a debt is outstanding the more likely it is to remain unpaid, so early recovery is extremely important in debt collection.
Commercial collection agencies in most cases are not paid until they collect; at that point they receive a percentage of the recovery. In this way, they can actually be cheaper than using in-house collections, because an employee doing collections is taking time away from other work that he or she could be doing.
When using an agency, there’s no cost up front, and no cost at all if they are unsuccessful. Some commercial debt collectors boasting success rates of as high as 98%, even after paying their fee your return rate is likely to be much better than it would be if you did it on your own.
Skip traces can also give you an idea of any judgments outstanding against the debtor, which can help you decide how far to pursue the collections process. If your commercial collection agency provides this service as part of their fee, it’s a significant reason to choose them.
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