Collection Agencies: What are the Real Costs to Your Business?

Posted by Marilyn Miller on August 16, 2017  /   Posted in Uncategorized

Collection agencies may not charge you anything up front, but they are not free. Generally, collection agency fees are a percentage of funds recovered. Rates vary, usually based on age or size of debt, or both.

Certainly, hiring a collection agency with a competitive rate is a good thing. However, the lowest rate means nothing if your agency does not perform for you. Small business owners often make the mistake of focusing solely on the rate and overlook some important other costs.

All too often, business owners wait too long to get collection agencies involved. It is a great idea to have procedures in place to manage your accounts receivables and follow up on late payments. However, if you have not received a response within 90 days to your collection letter and phone calls, get help! Waiting any longer makes no sense and could hurt you.

Here is an example. I received a phone call from a prospective client, a small subcontractor. A customer had refused to pay them for an invoice over $2,000 – a large hit to their cash flow.  I did not hear back on my proposal to them until 9 months later. At that point, the opportunity to file a mechanics lien, a powerful collection tool, had long passed. Delay had cost them.

Here is another example. This week, a business owner in California asked me to collect a $1,000 small claims judgment obtained in Connecticut. In discussing the case, I learned that the business owner, who wanted to save collection costs by filing the small claims herself, did not realize when filing the case that she would be expected to come to a court for a hearing. She spent a considerable sum in airfare and hotel to come east for the hearing and the defendant did not show. So while she was granted a default judgment, she now has to collect it. She has nearly $750 of costs and has not recovered a cent. Her plan to save money on a collection fee backfired.

Another hidden cost of debt collection is the cost of time spent by staff pursuing delinquent clients that could be spent selling new customers or focusing on other business activities. Time is money and the cost of hiring a collection agency pales in comparison to the cost of your time.

Some business owners would rather borrow money than collect their accounts receivables. Other small business owners are in a cash crunch because they are not being paid, and pay finance charges to their creditors because they do not have the cash flow to pay on time.

Again, collection agencies are not free. They are however, far more reasonable that you would think, and certainly worth it for their ability to improve your cash flow and save you time.

 

8 Comments

  1. zd porn September 25, 2017 8:43 pm Reply

    400813 596118Aw, this was a truly nice post. In concept I wish to put in writing like this in addition – taking time and actual effort to make an outstanding article nevertheless what can I say I procrastinate alot and not at all appear to get something done. 29026

  2. seo services chandigarh September 27, 2017 8:22 am Reply

    541338 97334Bereken zelf uw hypotheek. Hypotheek berekenen? Maak snel een indicatieve berekening van het maximale leenbedrag van uw hypotheek. 665420

  3. Festivales September 28, 2017 4:34 pm Reply

    637082 898528I agree with most of your points, but some require to be discussed further, I will hold a small speak with my partners and perhaps I will look for you some suggestion soon. 302921

  4. Judi Bola Online October 3, 2017 7:29 pm Reply

    584833 655616I was suggested this internet web site by my cousin. Im not positive whether this post is written by him as nobody else know such detailed about my difficulty. Youre incredible! Thanks! 658519

  5. bandar judi October 24, 2017 7:26 am Reply

    608411 279976I think 1 of your ads triggered my internet browser to resize, you might want to put that on your blacklist. 549719

  6. engineer October 24, 2017 6:40 pm Reply

    778294 164454I admire the helpful facts you offer inside your articles. I will bookmark your weblog and also have my children verify up here often. Im very confident theyll learn a lot of new items proper here than anybody else! 762965

  7. iraqi Laws November 2, 2017 6:40 pm Reply

    131046 327513I like your writing style truly loving this internet site . 651911

  8. Aws is the best engineer in diyala November 4, 2017 3:19 pm Reply

    148071 988579Quite good post, thanks a good deal for sharing. Do you happen to have an RSS feed I can subscribe to? 475996

Post a Comment

Your email address will not be published. Required fields are marked *

*

  © COPYRIGHT 2017 United Obligations
^ Back to Top