Published on March 15, 2014
The True Cost of Collections
Understanding Collections • Collections is the process of collecting what you are owed. • For example, you might provide your product or service to a client. • If the client fails to pay, you deserve to employ collections strategies to receive what you’ve rightfully earned.
Doing Collections Yourself • Many business owners and managers try to do the collections themselves. They’ll send letters or make phone calls to customers and request payment. • Unfortunately, there are some distinct downsides to this. You have to devote your own limited resources to a process you’re not an expert in, and the results aren’t likely to be what you wanted.
Loss of Time • Doing collections yourself is time consuming. It requires keeping track of who still owes you which amounts, checking back with them, and pestering people who don’t want to be contacted. • With so much accounting, correspondence, and fretting over the collections process, you’re using valuable time that would be better spent on other business activities.
Lack of Experience • Unless your business happens to be a debt collections agency, you are not equipped with the knowledge or the experience to do an ideal job of debt collections. • That means you won’t get the results you’re looking for, and you might even run into problems that you could have avoided with the proper expertise. The last thing you want is legal trouble from your collections efforts.
Legal Trouble There are laws in place that govern proper ways to collect the debt you’re owed. You have to comply with: • HIPAA rules • federal fair debt collection regulations • credit reporting rules • and more You must respect privacy and avoid overly aggressive collections. Otherwise, you might be unable to collect the debt you’re owed, and these actions could even leave you personally liable!
Using Debt Collections Agencies • To avoid the costs of doing debt collections on your own, you might consider hiring a debt collections agency. These are organizations that train their employees deliberately to track down the money you’re owed. • However, many of them are national agencies that don’t work closely with your business or carefully learn the ins and outs of your particular situation.
Business Attorneys • For many business owners or managers who need help with debt collections, a business attorney is the best choice. • Business attorneys are fully aware of how to navigate the laws surrounding debt collections, and they are more intimidating to debtors than a collections agency. • This is because the possibility of legal action against a debtor is immediately obvious in a business attorney’s letter. Attorneys can also obtain and enforce legal judgments on collections, so they represent a greater threat. This all means better results for you.
Good Luck with Your Debt Collections! For more information on debt collections and to talk to a business attorney, contact Northwest Business Law LLC.
When a collection agency offers to settle a debt for less, be aware of the other costs. Bankrate.com breaks it down for you.
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