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Collection Agencies: What Do They Do?
Collection agencies are businesses that collect past-due bills
and accounts receivable for other persons or businesses in
exchange for a fee. Collection agencies charge for their services
one of three ways:
1) A flat fee.
2) A percentage of what is collected.
3) Through a direct sale of the delinquent accounts.
If you are trying to collect a small or medium sized debt,
using collection agencies that charge a flat fee are probably
your best option - collection agencies that charge a flat fee
work just as hard to collect a small debt as they do to collect a
large debt.
If you have just a few large unpaid receivables, working with
collection agencies that charge a percent of the total debt
collected is a wise choice. (usually 25 to 50 percent).
The third option, selling your uncollected receivables at a
discount to certain collection agencies is advisable only if you
have a very large amount of debt - usually $1 million or more.
The selling price is typically a minuscule 2 to 8 cents on the
dollar.
Most collection agencies use one of three tactics to collect
debt:
1) Letters.
2) Direct contact via the telephone.
3) Litigation.
Typically, collection agencies begin the collection process by
sending a series of notification letters, often called demand
letters. The final notification letter generally warns the debt
dodger that if the past-due account is not paid by a certain
date, his or her name or company will passed on to more intensive
collections.
Many collection agencies also pay their staff to phone the
debtor directly. This direct contact is most useful in turning up
the heat on debtors who have identified themselves as having no
intention to pay their bill.
Litigation - in small claims court or a full-scale courtroom -
is a final option.
Besides sending out letters and making phone calls, some
collection agencies also specialize in locating debtors who can
no longer be reached at the address or phone number listed on
their accounts. To determine whether certain collection agencies
offer this service, ask them about their "skip tracing"
abilities.
Collection
Agency Outsourcing - Outsourcing accounts receivable to a
professional collection agency has become a popular alternative
to attempting to collect receivables in-house.
MORE RESOURCES:
Credit - Google News
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