Bad debts can bring down your business. However, most business people find themselves in a dilemma of whether or not they should hire debt collections services to push clients to pay their debts. Below is an extensive article detailing the benefits of hiring a debt collection agency and what to consider when engaging the service.
What are The Benefits of Debt Collection Agencies?
Engaging a debt collection agency shows the bad debtor that you are willing to go to all lengths to recover the debt. Typically, the collection agency handles all correspondence between you and the debtor. Since the debtor can no longer contact you regarding the debt, they are likely to pay up to get the collection agency off their back.
In some cases, the client does not have the finances needed to repay the debt. For instance, it could be their business is facing hardship. However, they could be more than willing to clear the debt. The collection agency steps in by helping the debtor explore payment alternatives. For instance, they could commit to paying the debt in small instalments. Alternately, they could dispose of some assets to clear the debt.
You are likely to break the law if you decide to pursue a bad debtor. For instance, you could threaten or assault them as you demand your money. In other cases, you could trespass on their property or forcefully take some of their assets as collateral. These actions could lead to jail time or severe penalties. Consequently, the collection agency understands the laws to observe when collecting debts. Therefore, it is pretty difficult for the agency to break the law. Besides, most agencies have liability insurance that shields customers from suits resulting from the agency's negligence.
Choosing a Debt Collection Agency
Conduct due diligence to establish the agency's competence. For instance, are clients satisfied with the agency's services? How long does the agency take to collect debts? Does the agency observe the law when collecting debts? These assessments are essential since they help you pick an agency that can help you recover the debt in the shortest possible time. Most agencies have real-time data on the progress made in collecting the various debts. The rule is to ensure the collection collects a significant percentage of its client's debts. Finally, inquire about the collection charges. The best approach would be to negotiate for a contingency fee. Simply put, the collection agency receives a percentage of the collected amount, and the customer does not incur extra charges.