What is the best time to hire a Debt Collection Agency

Published On : May 4, 2023

When discussing about debts, non-payment issues have become quite common when it  comes to recovering overdue debts. Payment collection has become a constant problem for  organizations. If an organization often encounters overdue accounts or reluctant payers, it may have a  negative impact on its business. Even if you keep a strict credit check on the credit standards  of your clients, it may happen to you. In this happens too frequently for your comfort, maybe  it’s time you may have to consider hiring a debt collection agency. The longer you take to  make this decision, the more you will have to wait for overdue payments. So, are you aware of when (and why!) should you involve a professional debt recovery  agency? 

Keep reading…

What is a Debt Collection Agency?

A debt collection agency or debt recovery agency or just “debt collector” refers to  professionals/agencies specialized in recovering pending financial dues who help you collect  as part of their jobs. Many organizations actually “purchase” long-outstanding debts from different creditors and then collect them. In the financial recovery industry, debt collectors  go by many names, like “Collection Companies”, “Debt Buyers”, and “Debt Collection  Agencies”.

When Should You Hire a Debt Collection Agency?

If you’re not sure about when you should hire a debt collection agency, the following tips may  help you:

Locating a debtor is difficult .

If a debtor has given you an incorrect residential address or phone number, tracing him/her  obviously becomes a very difficult task. This is where debt collectors can help you solve this  issue. These professionals have a wealth of experience in tracking down debtors. They receive  professional training when it comes to finding non-paying clients. Also, they have the right  tools that assist them in the tracking process.

The debt is two months overdue

If the debtor has not paid any amount for more than two months after the last payment, it  may probably be time to seek the assistance of a debt recovery agency. Here you need to  understand that hiring a debt collector doesn’t guarantee you will retrieve the funds in time. Corporate legal departments have even fewer chances of success in recovering overdue  debts. Thankfully, professional debt collectors may be able to recover the money owed to you  in ninety days or beyond.

Bounced Cheques

Nothing frustrates more than receiving a bounced cheque from a client. It gets worse if the  customer gives you multiple cheques that are all bound to bounce. This is an unquestionable indication that your debtor has absolutely no intention of repaying you whatsoever. If the given bank cheques bounce on you more than once, it is recommended to not take any  more risks and immediately contact a debt collection agency. The debt collectors are  professionally trained in dealing with these types of clients and know exactly what steps are  needed to retrieve the outstanding dues back.

Stalling Customers

Debtors who keep you expecting/hanging/waiting are much more difficult to track down.  Many of them put off service representatives when it is time to pay. And most of them have  no intention to pay either. If the debtor doesn’t return your calls or avoids discussing their overdue payments, you’ll definitely need the help of a debt collection agency.

Benefits of Hiring a Debt Collection Agency

Generally, most startups and small businesses don’t have sufficient time or resources to  locate, trace, and call customers who have long-overdue invoices. By contrast, large  organizations and corporates operate via their own dedicated internal collections department  to work around these issues. But despite all these measures, most often, debt recovery becomes ineffective and overwhelming.

Here are some benefits of using the services of a debt recovery agency.

✓ Documentation

If you have no experience in handling documentation involved in contacting and  tracking down debtors, tracking down payments can be difficult. Keep in mind that if  you decide to sue the debtors to recover funds, you need proper paperwork to collect  the money. A debt collection agency prepares records and documents for the entire  process according to IRS requirements.

✓ Legal Protection

If you’re not familiar with laws like Debt Collection Act, it is better to rely on the  expertise of a debt recovery service. Trained and certified recovery professionals act  as collectors who understand state and federal laws associated with collection  practices. They can handle your business accounts without legal implications.

✓ Faster Payment

It has been observed that customers who owe you money pay faster when a  professional debt collector approaches them. They do this because they know that if  they avoid payments, it will almost certainly affect their credit scores. Thus, they  respond immediately to save their credit ratings.

Points to be noted while hiring a Debt Collection Agency

RETURN ON INVESTMENT

Always consider hiring a debt collector who has the expertise to collect the money faster and  more efficiently.

EXCELLENT AND RELIABLE CUSTOMER SERVICE

The debt recovery industry has many agencies having extremely negative reputations. That is  why you should always review the customer services of the debt collection agency as  thoroughly as possible, before deciding to hire them. You need services that can create an  individualized payment plan for you and also accept different modes of payment.

REFERRALS AND REVIEWS

Always read online reviews or talk to the people who have already used the services of the  debt recovery agency you want to hire.Every business has targets that keep increasing and keeping stringent checks on their cash  flow frequently and regularly can prove to be a hectic, time taking and tedious for many organizations. Therefore, it’s prudent to opt for professional debt collectors to avoid and  minimize the risk of recurring defaulters and freeing up their resources associated with the same. Debt collecting saves the most essential assets of an organization – i.e. Time and  Capital. Thus, it affects your credit score directly and therefore, hiring a debt collector must  be your smart move to get the job done.