Let’s talk about some of the most common responses we get when calling on new prospects. Now, before you give up on this topic from the very beginning, stick with me; it’ll be worth it. Then ask yourself this question about debt collections - are you doing it wrong?
“We have an in-house collection group”, or “Our office manager handles that”.
Or, “Our owner says that he can’t afford a collection agency”.
Okay then, take a look at the facts and the numbers, they don’t lie.
After an account has gone through 2 or 3 billing cycles, the chances of recovery begin to drop dramatically, and usually, an in-house group or individual will beat the phones to death, virtually begging and pleading for money and of course, sending letter after letter in the mail. The monetary elements of this process that aren’t considered in these in-house scenarios are the costs of printing, staff time and salary, postage, and overhead. In fact, “the average cost of processing an individual invoice is between $12 and $30. Other firms narrow this gap to between $12.90 and $15. Some place it as high as $40.” Considering that companies send multiple letters in an attempt to collect a debt, these costs add up quickly. When you consider that typical rates for a collection agency range from 12% to 25% depending on industry and volume, using one could actually save you money.
Unless you have a collection department focused on your customer retention, committed your your reputation, that is highly skilled and has access to the latest in technology that a professional and licensed collection agency has, you could be setting yourself up for failure. A professional debt collector whose entire day goes into calling debtors using the latest in technology and effective tactics is far superior to a group of administrators that may not have access to these critical components of collecting.
Some people worry that hiring an agency could be bad for their reputation. Let’s unpack this concern. A reputable agency understands that they are the face of your organization; in fact, while we don’t say that we are “with” your company, the debtor will overlook this and combine the experience of the collection call with your business. If it’s handled correctly – this isn’t a bad thing. There are a lot of myths that are associated with hiring a collection agency like “all collection agencies are the same”, or “it takes too much time to put together the accounts for an agency”, or even “collection agencies don’t want to work for small businesses”. Believing these myths are detrimental to a business and can impede your success. In fact, according to a U.S. Bank study, 82% of business failures are due to poor cash flow.
Clearly, when expenses exceed income, you have a cash flow problem, and it’s often at this point that a business will reach out to a collection agency when accounts are 6 months or more behind in a desperate attempt to pay employee salaries, buy materials or inventory, or simply pay utilities and other overhead. At this point, it may be too late. Business.com reports that debts over 90 days old have a 75% likelihood of being collected and at 120 days it drops to 50%.
All of these problems could be rectified by hiring an efficient and effective collection agency early on. Whether it’s outsourcing at day 31 or traditional collections at day 91, we can do the hard work for you and increase your chances of recovery.
For more information on how Account Resolution Team can help YOU get your money, call 423-586-7613 or visit www.accountresolutionteam.com