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March 8, 2013

Understanding Agency Size and Collection Agency Fees

7572745_mDoes size matter?

In other words, when it comes to hiring a collection agency does the size of the company affect how much you will have to pay in fees each month? The answer is basically… no.

Most collection agencies charge a fee based on the percentage of revenues collected on your behalf.

Now, the percentage “cut” they collect in fees might vary from agency to agency.

Agency size and fee structure

Large or small, collection agencies are only as effective at collecting your debt as the employees who make collection calls on your behalf.

So what does this mean to you?

Without trained staff working alongside professional, ethical and experienced collectors, you will simply not be successful in collecting outstanding accounts receivables.

Which means, hiring a collection agency is more about finding the right “partner” to work with than selecting a large or small firm, or the cheapest one as well.

So does size matter at all?

A large collection agency (typically having 50 or more collectors) is more capable of handling high volume clients with ease.

For example, they normally have a dialer system that can generate hundreds of calls an hour. What’s more, they have plenty of collectors who can handle this kind of call volume.

The down side?

Having a larger staff makes it harder to provide “oversight” to make sure that ALL the calls being made adhere to applicable state and federal collection laws. Also, like any larger organization, you will find that some collectors perform their job better than others — meaning that the “success rate” for collections will vary based on who is actually making the calls.

Smaller collection agencies, on the other hand, also have their strengths and weaknesses.

The pros?

Smaller agencies typically specialize in specific industries.

This means that their success rate for collections tends to be higher than the larger agencies. Additionally, smaller agencies tend to provide better training than the larger firms as well as providing better monitoring of the collections process.

For companies who have less than 500 outstanding accounts a month hiring a smaller agency, especially one with expertise in your industry, is a better match than hiring on of the “mega” collection agencies. Besides better and more personalized customer service, they are ideal for companies looking to have an ongoing relationship in order to streamline the billing and collection process for future outstanding bills and invoices, rather than simply collecting what hasn’t been paid in the past.

The challenge in working with a smaller agency?

Because of limited staff, they are not the best choice for businesses with a high number of outstanding invoices with low dollar amounts.

For example, if you have more than 500 accounts a month they may find it challenging to keep pace with your needs. This could mean less recovery and potentially losing a client due to lack of performance.

So how does fee structure fit in?

Most collection agencies today charge a percentage of collected revenue. So, large or small, the fee structure is roughly similar (though a smaller agency may be more competitively priced). Other fees may result if you require additional services, such as skip tracing.

Before choosing a collection, ask about any additional services they may be able to offer you, and make sure you have a clear picture about how these additional services affect the overall fee you’ll have to pay.

Does that make sense?

Deciding the size of the firm to use depends on your specific needs.

If you are placing high volume low balance accounts, large will probably be the better option for you (though not always). If, on the other hand, the debts are larger and lower volume of accounts, it may be best to look for a smaller more focused collection agency.

Either way, the decision is always up to potential clients to decide which sized collection agency suits your needs.

Find a debt collection agency today

To find a collections agency that specializes in helping business likes yours, simply request a free services quote from qualified and reputable companies.

Click the link and compare free collection agency quotes today.

Or you can follow the link for our list of collection agencies and research providers for yourself that can help you get set up for your State or Metro area.

After all, at the end of the day you have only 2 choices:

  1. keep doing what you’re doing and hope for a different result
  2. or get outside, professional help with your outstanding accounts receivables today

Either way the choice is yours.

Filed Under: Business Debt Collection, Business to Business Collections, Collection Agency Services, Hire a Collection Agency

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