Does your firm need help with the collection cycle? Consider a third-party collection agency.
Outsourced debt recovery firms contribute a significant amount to the U.S. economy in the form of recouped receivables. An Ernst and Young study suggested an annual contribution of $45 billion. The study showed an economic ripple effect, from helping lower the cost of goods and services to improving the volume of tax revenues.
Despite a track record of contribution to the American economy, some companies believe there are still negatives tied to working with a collection agency.
This post explores the pros and cons of working with a third-party debt recovery agency. What should you look for in a qualified collection agency?
Pros of Working with a Collection Agency
InsideARM covered the Ernst and Young study, which sought to quantify the economic effect of the collections industry on the U.S. economy.
The study showed:
- Improved asset recovery
The survey showed $55 billion recovered for collection agency clients annually. These organizations are focused on one primary purpose; improving the bottom line by recovering what is owed to your business.
- Positive impact on the cost of goods and services
The data showed the increased corporate revenue captured by collection agencies ended up saving consumers $396 per household by lowering product and service costs.
- Collection agencies create jobs
These firms carry a payroll of around $10 billion annually, according to the study.
- Tax revenue
The study also reported that collection agencies pay out more than $495 million in federal taxes and more than $500 million in state and local taxes annually.
Debt collection agencies have tools and resources that most small to mid-sized businesses don’t have. Agencies like Rocket Receivables have experience and technologies that help improve the firm’s success collecting past due receivables.
These are just a few of the more obvious positive aspects of hiring a third party collection agency. Now let’s review the negatives.
When considering a collection agency, consider your options.
Cons of Working with a Collection Agency
Recovering past due debts can be tricky business, so it is important to work with reputable agencies. Not every collection recovery firm will be a good fit for your business.
There are costs associated with working with collection agencies. While many work on a contingency, they take a percent of what they collect as their fee. However, most companies believe that collecting some debt is better than losing everything owed. For these companies, a revenue recovery firm is still the best option.
It’s also important to realize that debt collection is one of the most highly regulated industries on the planet. If a collection agency runs afoul of the law, it is likely that your company will be held accountable for their misdeeds. Agencies such as Rocket Receivables have staff dedicated towards maintaining compliance with all state and federal collection laws.
While a collection recovery agency can relieve you of following up with delinquent clients, the customer relationship may be dampened. This is especially true when working with unethical agencies that resort to unscrupulous practices.
Before hiring an agency, take the time to find an experienced and professional collection agency. Look for one that is familiar with your particular industry.
Finding the Right Collection Agency
Business News Daily had a recent article on what to look for in a collection agency. They recommend these criteria for third-party debt recovery firms:
- Do they have positive referrals?
- Is the collection agency properly licensed and insured?
- How secure is the data they handle and how will they keep your information safe?
- Do they have best-in-class digital technology to help improve processes?
We think you’ll only see the pros when working with Rocket Receivables. Sign up today and start collecting on your past due accounts.