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Commercial Debt Collections

How To Choose A Commercial Debt Collection Agency

Often, a commercial debt collection agency that charges a low commercial debt collections fee does not produce enough net back. Following provides a simple example. For this example, it is assumed that a company places an equal dollar amount of accounts with two commercial debt collection agencies. commercial collection agency 1 charges 30%; commercial collection agency 2 charges 40%:

Agency 1 Agency 2
Amount Placed $100,000 $100,000
Amount Collected $30,000 $60,000
Collection Cost $9,000 (30%) $24,000 (40%)
Net Back $21,000 $36,000

In this example of net back, commercial collection agency 2 returned $15,000 more to the company than commercial debt collection agency 1, although it had a substantially higher commercial debt collections fee, 40% vs. 30%. 

You would be way ahead of the game if you had chosen commercial debt collections agency 2 over commercial collections agency 1. It is important in selecting a commercial debt collection agency that you look beyond the fees that they are charging and understand the other elements, like collector motivation, the commercial debt collection agency reputation and recovery rates that will be applied to collect your accounts.

Try to contact creditors in your industry that are currently using the commercial debt collection agency. Find out if they are happy with the commercial debt collections services. Make sure the commercial collections agency complies with all state licensing and bonding laws for commercial debt collections. Find out how long the commercial collections agency has been in business, how many clients they have, and if they have liability insurance.

Make sure the commercial debt collections agency you choose complies with the Fair Debt Collection Practices Act (FDCPA), and the Fair Credit Reporting Act (FCRA) - this is critical. These are the laws that regulate the commercial debt  collections industry. Also, what can the commercial collection agency do for you? Do they offer you online account placement and reporting? Do they provide skip tracing? Is there a monthly or a sign up fee to do business with them?

You want to choose a commercial collection agency that will represent your business in a professional manner. You want a satisfactory rate of recovery without harming your business reputation. Your careful choice in choosing a commercial collections agency strengthens your bottom line and helps you to retain customers leading to a more profitable business.

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