If you own a business which offers credit facilities to its customers, chances are very good that sooner rather than later some of them will either not pay at all, or pay less than they have to, or later than agreed. This can result in serious cash flow problems for your business and you might even face the risk of having to close down. There are basically two solutions: either you have a dedicated collection department or you employ a commercial collection agency. In this article we will discuss the merits of using a collection agency.
Free existing staff: The first major benefit is that your staff members will no longer have to carry this burden. By using an outside agency you will free your own staff members to concentrate on their core duties. This is unless you have a full-time collection department, in which you carefully have to weigh the cost of running the department against that of using an agency.
Cost: A full-time collection department will result in salaries and contributions that must be paid every month, whether they are successful in recovering outstanding debts or not. The majority of commercial collection agencies work on a system whereby they only get a commission based on the amount of money they collect on your behalf.
Response time: The more money you have tied up in outstanding debt, the less money you have in the bank. This means you have less money to run your business with and you will either lose out on interest received or pay more interest on your overdraft. It's therefore imperative that debt be collected as soon as possible - something which comes naturally to a collection agency. You might find that your own staff drag their feet when it comes to collecting money, because most people hate to do this.
Lost sales: One very often finds that companies utilize their sales staff to collect outstanding debts. The reasoning seems to be that since you made the sale, you must also make sure the money comes in. This is not a sound argument. The relationship between your sales staff and the customer is of the utmost importance. Forcing sales staff to collect payments can irrevocably harm this relationship. Secondly, while a sales representative is busy trying to collect outstanding payments, he (and your company) is losing out on new sales since he can't do both at the same time.
Retaining Customers: It costs a lot of money to acquire a new customer. It's therefore in your own best interests to try and retain your customers for as long as possible. By using an external company to handle debt collection, you won't have to police your own customers. This will help to maintain good relations between you and the customers.
In the current economic climate it is very important for any business to remain credit worthy. If you have a large and growing amount of outstanding debt, banks will start to view you as a high credit risk. This is one more reason why you should consider using a professional commercial collection agency.
Free existing staff: The first major benefit is that your staff members will no longer have to carry this burden. By using an outside agency you will free your own staff members to concentrate on their core duties. This is unless you have a full-time collection department, in which you carefully have to weigh the cost of running the department against that of using an agency.
Cost: A full-time collection department will result in salaries and contributions that must be paid every month, whether they are successful in recovering outstanding debts or not. The majority of commercial collection agencies work on a system whereby they only get a commission based on the amount of money they collect on your behalf.
Response time: The more money you have tied up in outstanding debt, the less money you have in the bank. This means you have less money to run your business with and you will either lose out on interest received or pay more interest on your overdraft. It's therefore imperative that debt be collected as soon as possible - something which comes naturally to a collection agency. You might find that your own staff drag their feet when it comes to collecting money, because most people hate to do this.
Lost sales: One very often finds that companies utilize their sales staff to collect outstanding debts. The reasoning seems to be that since you made the sale, you must also make sure the money comes in. This is not a sound argument. The relationship between your sales staff and the customer is of the utmost importance. Forcing sales staff to collect payments can irrevocably harm this relationship. Secondly, while a sales representative is busy trying to collect outstanding payments, he (and your company) is losing out on new sales since he can't do both at the same time.
Retaining Customers: It costs a lot of money to acquire a new customer. It's therefore in your own best interests to try and retain your customers for as long as possible. By using an external company to handle debt collection, you won't have to police your own customers. This will help to maintain good relations between you and the customers.
In the current economic climate it is very important for any business to remain credit worthy. If you have a large and growing amount of outstanding debt, banks will start to view you as a high credit risk. This is one more reason why you should consider using a professional commercial collection agency.
About the Author:
Learn more about a commercial collection agency. Stop by Burnstein and Burnstein's site where you can find out all about our collection agency and what it can do for you.
