NCCA


Why use a collection agency?

We have all heard some accounts receivables managers declare if they cannot collect this account, then nobody can. This statement can be compared to a person saying if I cannot fix my plumbing problems than nobody can, not even a plumber. The plumber will rely on tools and experience combined with knowledge to investigate and fix the problem and the person might just be proven wrong.

The same logic applies to collection accounts; there is a limit to what a manager can accomplish by himself without the proper tools, experience and knowledge to handle extreme situations. When a debtor never returns a creditor’s calls no matter how long and how many times the creditor has tried, then it is time for a new approach; a credit manager or collection clerk can only do so much as they have to work hundreds of accounts within the course of a month.

When we say that it is time for a new approach, we mean it is time to hire a specialist. There are 2 possible specialists that the creditor can employ to collect unpaid amounts: an attorney or a collection agency.

An attorney will not investigate the account and will not contact the debtor to negotiate unless very large sums are owed. The cost to the creditor will be around 40% of the amount. The attorney will send a lawyer’s letter and if it does not work will ask the creditor to start legal proceedings without knowing the debtor’s financial situation. The creditor might spend the money for litigation to find out later on that the debtor is unsolvable.

A collection agency on the other hand will not charge if there is no collection. The collection agency will investigate and contact the debtor on a regular basis until the collection agent knows the reason of non-payment in order to negotiate a full payment, partial payments or settlement depending on the debtor’s capacity to pay.

A collection agency will eventually reach a debtor that is not responding to phone calls through investigation. In the event that the account is collected, the cost to the creditor will still allow for a profit to be made, whereas a lawyer’s fees, legal costs and disbursements will probably eat up the creditor’s profit margin.

The services of an attorney should be required only if all else has failed; in fact, the attorney can use the results of the investigation done by the collection agency in the court of law.

Our collection agents are trained specialists with knowledge of collection, the law, accounting, administration and negotiation; combined with years of experience facing similar situations. We also supply our agents with investigative tools that might be lacking in an accounts receivables department.

Collecting outstanding accounts can be time consuming for collection managers; instead of calling the debtors in the 30-60 day columns, they spend time trying to reach 90 day and over debtors.