Resource Guide
Why Use a Collection Agency
Most businesses delay collections because the cost feels unclear.
The cost of waiting usually is not.
The Hidden Cost
Your Most Valuable Asset
When deciding to outsource collections, remember that time is money. Few company owners, officers, controllers, or credit managers have taken the time to evaluate their hourly worth to their company. Not their hourly paycheck, but their hourly production.
You produce more for your company than you receive in pay. It is that lost production that few people consider when budgeting time and expense.
Time spent recovering past-due accounts is time no longer spent creating value.
The Budget Question
How do you budget for failed recovery?
In direct budgeting, how does your company budget to recover bad debt? What percentage of your profit do you financially devote to collections? How much money do you allocate for failed recovery of debt?
This is one of the best things about outsourcing your collections: it does not cost you anything if your agency fails to collect. The collection industry works on a contingency plan where our fee depends on successful recovery of your money. If your agency charges you a penny prior to successful debt recovery, fire them immediately.
Internal collections costs time, even when nothing is recovered
In man-hours and money, this is a huge in-house expense that 99% of the time goes unbudgeted.
Supporting insight
The agency advantage: Collection agencies maintain a consistent level of efficiency because when times are lean for one client they are good for another. This allows the agency to maintain staff and continue working at near peak efficiency for all clients.
Efficiency Under Pressure
Every industry has cycles
In every industry there exists a cycle: good times and lean times. When the industry is healthy and the economy is sound, your collections costs and staffing are reduced. When the industry dips and the economy sags, your collections costs and staffing increase.
Attempting to look into a crystal ball and the subsequent recruiting and laying off of staff is a grossly inefficient waste of money, time and benefits.
THE ANTIFRAGILE STRUCTURE
Diversification absorbs volatility
Collection agencies avoid the economic cycle by having large numbers of clients and diversification across industries. This maintains a consistent file count per collector, which promotes the correct amount of contact to recover the most money from your debt write off.
Antifragile Under Stress
Expertise that does not contract
Agencies maintain a depth of specialized expertise that does not expand or contract with individual client cycles.
Collector quality remains stable regardless of macroeconomic conditions, avoiding the hiring, training, and attrition risks that affect internal teams during downturns.