Benefits of using the services of a debt collection agency

Any company in the financial sector, whether small, medium, or large, always has a’receivable source of income’. This is the amount of customers’ dues. An Annual Accounts Statement will likely contain a column indicating ‘bad debts’ and pending dues. These amounts can be recovered in part, but not all. There may also be long-winding legal proceedings that can take many years to resolve. According to Pricewaterhouse Coopers (PwC), in 2000, debts were recovered by external collection agencies up to $30 billion per year. This is an incredible amount!

Companies can choose to either handle receivables internally or to outsource international debt collection work to external agencies. These agencies are commercial third-party collection agencies that are contracted by companies to recover the amounts due. This agency is known as a Debt Collection Agency. These agencies are subject to the Fair Trade Debt Collection Practices Act regulations and have the expertise and knowledge of how to collect debts.

A Debt Collection Agency offers many benefits, including:

* The company’s internal accounts department is responsible for collecting any amounts due to it. However, ‘aging receivables’, which refers to long-standing debts, requires a lot more skill, time and dedication, and may require extensive training. A third-party service, or commercial collection agency, is able to collect money that may not be recovered otherwise. This can save the company a lot of money and time.

If monies remain unpaid by customers, sales teams from companies are often not paid their commissions and incentives. Salespeople are forced to spend more time trying to recover money than they do making sales calls and generating future revenue. This has a significant impact on a company’s revenues.

* While acquiring new customers can be costly, retaining current customers is crucial to the longevity and success of any business. As it can cause negative consequences for customers, companies don’t want to play the role of the ‘bad cop’ when they are trying to recover their debts. The use of a third-party service for sending notices to creditors to recover debt usually encourages the person or company that owes the money to take action, without affecting the relationship with the company.

* Business to business circles have a policy of extending bill payments as long as possible in order to improve cash flow. Sometimes, invoices are not released if a collection agency does not intervene to demand payment.

Companies can save money by paying collection agents a fixed salary to collect debts, regardless of the amount. This allows them to spend less on salaries and training them to collect their dues. Companies pay collection agencies only when the money is recovered.

Banks, especially, must keep their ‘ageing receivables to a minimum in order to extend credit lines to customers. Banks can only succeed in reaching their targets deposits and revenues if they fuel growth. The bank can use a commercial collection agency to quickly recover money, keep customers happy, and maintain creditworthiness.