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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