When should you hire a collection agency?
The general answer is sooner, rather than later. The chances of collecting even a portion of what’s owed to you decrease significantly as time passes.
Quite simply, the longer you wait the less likely you’ll be able to collect even a fraction of the outstanding payment.
Now, clearly a lot businesses prefer to start the collections process in-house.
And that’s okay as a first course of action.
But at some point you’ll probably need outside help when your 2nd and 3rd notices aren’t returned with a check or credit card payment.
When to contact a collection agency
If you started the collection process in-house by re-invoicing your customer, client or patient and they still haven’t responded by calling your office or sending in a partial payment you probably want to contact a collection agency now.
Consider this… you probably sent out “reminder” invoices after the first missed deadline. So now there’s a good chance your 30+ days past due by the time the 2nd invoices remains unpaid.
Statistically it has been shown that your odds for collecting even a portion of what’s owed diminishes greatly after 90 days have elapsed.
So you really don’t want to wait 3 months, or more, before getting a collection agency involved. And though these statistics do vary somewhat based on the nature of your business, waiting past 90 days before getting professional help will have an affect on how much they’ll be able to collect on your behalf.
Reasons people wait before hiring a collection agency
I personally think that there are a few reasons why business owners wait before contacting a collection agency.
It could be because:
- you may not think that a collection agency will work with you unless you have a lot of outstanding accounts
- you don’t want to “offend” or unduly upset former customers, clients or patients
- you’re uncertain about what the total cost for getting professional help
Yet, each of these reasons is based on certain misconceptions regarding today’s collection agencies.
For example, many agencies will work with you even if you have less than 10 outstanding accounts. And finding the right professional agency means hiring an outside firm that will help you now and well into the future should you have future payments unpaid. In essence, they can act as your billing “partner” to integrate with your billing process the moment a customer or client becomes more than 30 days past due.
With that said, collection agencies now operate under more strict guidelines than in years past.
In fact, they have to work within state and federal guidelines that apply based on your place of business and for the state(s) where your customers reside. Agencies like the Bureau of Consumer Financial Protection (CFPB) monitor the practices of collection agencies by writing and enforcing rules for financial institutions.
With an increased focus on compliance this is reason enough to outsource your collection headaches to trained professionals.
Finally, when it comes to the cost of hiring a collection many work on contingency. Simply stated, the fee you’ll pay a collection agency will be based on a percentage of the revenue they collect on your behalf.
At the end of the day, a set percentage of “something” is better than 100% of nothing.
Regardless of all of the considerations, please keep in mind that timing is the most important factor for successfully collecting your unpaid invoices. When you get down to “brass tacks” hiring a collection agency sooner, rather than later, is always the best policy.
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.
This way you can save time, money and aggravation by hiring a professional who can help you collect some (or all?) of your outstanding accounts receivable.
After all, when you get down to it you really have two choices:
- you can keep doing what you’re doing (and hope for a different result), or
- you can find a commercial collections agency that can help you recover what’s rightfully yours.
Either way it’s your money… you decide.