Collection Agencies: Advantages And Disadvantages

The Pros & Cons Of Using Collection Agencies

Debt collection agencies act on behalf of creditors to collect on severely overdue accounts. Reputable agencies work within specific guidelines and adhere to the legal framework set down in Fair Debt Collection Practices Act, the federal law that regulates all collection agencies.

There are several advantages in using these agencies -

they remove the hassle of pursuing debts from your company, saving you time and money;
third party involvement in debt collection has proven time and again to improve your chances of recovering your money; these people are specialists in negotiating with debtors and the results usually speak for themselves
potentially a skillfully negotiated debt collection could mean continued future custom from the debtor;
debt collection agencies can combine sales ledger management and debt collection;
debt collectors keep you within the law...

The disadvantages are -

debt collection does cost money; you are trading off the debt collection against any charges made by the collection agency and/or a percentage of the money collected (although there are lower cost, flat fee alternatives);
the debt collection agency will be establishing a relationship with your customers which could be potentially harmful if they sour that relationship by not dealing with invoices in a courteous and diplomatic fashion...

Finally, remember to select a collection agency with a good reputation. Don't just shop for the best price. Remember- less reputable agencies can damage your own reputation as well as your wallet.