Using an external debt collection organization is often the best approach to collect on overdue debts. Before you hire, consider the following.
What you’ll discover:
While there are clever strategies to prevent debt collecting, there are instances when you need to engage a professional. After all, you have a company to operate, and dealing with overdue accounts may be time-consuming and exhausting.
That being said, not all debt collection agencies are made equal, and not every firm is appropriate for your specific company. Here are a few things to think about while choosing a partner in the process.
Debt collection organizations may specialize in certain areas. Some, for example, thrive at obtaining funding from huge corporations, but others flourish at dealing with tiny firms or home-based organizations. If at all feasible, learn about the types of debtors and companies that the collection firm often works with.
Debt collection organizations are subject to varying regulations in different states and municipalities. Check to see whether the person you intend to employ is bonded, licensed, and follows the guidelines of the Fair Debt Collection Practices Act.
Unfortunately, occasionally debtors flee town. To tackle this tactic, competent collection agencies use “skip tracing,” which entails using and having access to various databases to identify a debtor who has left no forwarding address. This is particularly critical if you’ve been approaching your debtor in person and have been consistently ignored.
Whatever research you do, there is always the potential that a debt collection agency would employ aggressive techniques or that the debtor will believe the agency acted in bad faith. In certain cases, the debtor has the right to sue. Whether you win or lose the lawsuit, you want to ensure that you are not held accountable for employing the agency. In the unusual event that your debtor takes you both to court, get evidence of insurance from your debt collector. This is often referred to as “Errors and Omissions Insurance,” and it is kept as protection by competent debt collection organizations.
Once you’ve identified a few collections agencies that would be a good fit for your company, it’s time to check at their fees. It’s worth mentioning here that how agencies charge for their services might vary greatly, and you should choose the one that works best for you. The following are some examples of frequent payment structures:
One thing to remember is that after you’ve engaged a debt collector, you will never get the whole amount you’re due. As a result, it is suggested that you exhaust all other possibilities before employing one, such as submitting your own Demand for Money Owed.
However, dealing with debtors may be irritating, time-consuming, and psychologically exhausting. It has the potential to deplete your resources. When you have no other options, hiring a debt collector is preferable to just letting your debtor avoid paying you.