Landing a new client can be exciting. But, when it comes to paying you, and the debt adds up, excitement turns into anxiety and disappointment. So, it may be time to consider hiring a commercial debt collection firm. When working on the smooth flow of businesses, the cash flow is a significant point you must consider. However, before we initiate the process of debt collection, we’ll focus on critical areas.
Commercial debt collection agency
Commercial debt collection agencies include professionals. They persuade debtors to pay their debt as soon as possible. There are commercial debt collection laws that are different from personal collections.
The FDCPA (Federal Debt Collections Practices Act) does not apply to commercial collections. When running collections, firms will ensure in maintaining client relations, whereas by the time a customer receives a call about personal debt, there might be an issue with the relationship.
Advantages of hiring a debt collection agency
Hiring a collection agency enables you to work with the experts. It helps you handle the debtor while you can focus on business. A professional negotiator has years of experience. They understand the inner workings of the collection agency’s systems. Meanwhile, they also implement easy to maximize clients’ chances of getting paid.
Besides, an in-house team of experts may include attorneys who can handle issues regarding legal matters or manage lawsuits if there is no resolution to debt between parties.
Collection cost
When partnering with a debt collection agency, most agencies bill under two agreements. The first is the contingency basis, where they only get paid if they collect money from debtors. On the other hand, contingency rates are based on the size of the collection and the time or age of the collection period.
The second option is a flat fee. Most commercial debt collection agency offer both approaches, with an initial flat fee and a contingency fee if money gets collected.
Rates and fees
Contingency fees may range from 10% to 50% based on the claim size. However, you must keep in mind that as the claims get larger, they often require special expertise and extraordinary efforts to negotiate a resolution; as a result, the total fee that gets earned grows higher.
In a flat fee agreement, the collection agencies generally charge a fixed rate per account, no matter the debt size. As a result, clients are set in advance, leaving no choice but to pay regardless of whether the debt gets collected or not.
The prices here start as low as $15 per account. However, we recommend a flat fee for creditors with more cases that are smaller in size.
One size fits all approach
Many commercial debt collection firms include one rate for all sizes. However, some collection firms may specialize in smaller claim sizes using automated letter campaigns, overseas-based collectors, call centers, and predictive dialer systems. These firms are known to charge lower contingency percentages. You must also keep in mind the age of the debt.
Final Wrap
The success of the commercial debt collection agency matters when it’s about collecting a debt. For example, a creditor will typically offer better off when hiring an agency that charges 20% with a success rate of 85% than the one that charges 18% but offers a 50% success rate.
While it’s essential to focus on the budgetary front, it’s equally significant to look at quality to pick the right combination that fits the situation. At Vital Solutions, we’re here to solve all the issues with debt collection. Get in touch with our experts to know more about the strategies we implement when going for debt collection.
