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If your invoice letters and calls are going unanswered then it might be time to hire a professional debt collection agency. It's a fact that the longer a debt goes unpaid, the less likely it is that it will ever be recovered.
Professional collectors have systems in place to streamline the debt collection process, leading to better success rates. They have special software and phone systems designed to keep track of how often they're contacting the debtor, ensuring compliance with federal laws. The staff specializes in debt collection strategies and your debtors will take them more seriously. Plus, debt collection can be a plain old hassle, a hassle you may not want to deal with.
Debt collection agencies vary in size and focus. Some are focused on a particular geographic area, while others have clients nationwide. Some specialize in debt collection for specific industries; others are more general in focus.
Debt Collection Agency Average Costs
The cost of hiring a debt collection agency varies based on the volume of business you provide and the amount of the debts to be collected. Some collection agencies charge a flat fee upfront to take on a fixed number of accounts. But, most take a percentage of the debts they collect, ranging anywhere from 20% to 50%. The older the account, the higher the percentage will be. This is because older debts are harder to collect and tike more of their time to do so.
In addition to a percentage of every debt collected, some collection agencies charge for other costs they incur while collecting your debts. They may charge long distance fees or bill you for the cost of doing a background check on one of your debtors. Be sure to ask for a complete list of fees and rates before settling on any one company.
Choosing a Debt Collection Agency
When you're considering various debt collection agencies, it's always a good idea to ask for a client list. This will give you an idea of whether the collection agency has experience within your industry and with similarly-sized companies. Make sure the agency is licensed to do business in the state or states where your debtors are located.
Keep in mind that the agency with the lowest rates is not always the best choice. In many cases, you're paying for experience. Larger and more established agencies with a proven success rate are likely to charge more.
Despite the expense, it is worthwhile to hire a collection agency if you're having trouble collecting old debts. Even after the agency takes a percentage, the payment you receive is money that wouldn't have been collected otherwise. It hurts to take a loss. But, it doesn't have to be a total loss.