Why You Need a Debt Collection Agency: A Business Owner's Guide
In order for your business to grow, you need a way to make sure that the customers who owe you money actually pay up. That is why debt collection agencies are so important in today's society. A debt collection agency will help you get back what is rightfully yours by helping you find and contact those who owe money and then following through with the necessary steps until they have paid up. In this guide, we'll go over everything there is to know about how these agencies work including how they can benefit your business!
Debt Collection Clauses on Invoices
Take these steps before learning more about why you need a debt collection agency as a business owner. First you should ensure that your invoices have a clear debt collection policy. This policy needs to include clauses around debt collection to ensure that you can recover debt efficiently and cost effectively. Check out our blog post on the benefits of debt collection clauses on invoices to ensure that you're business is protected.
Consumer Debt vs Business Debt
The difference between a consumer debt and a business debt is who the debtor is. For example, John Smith has an outstanding mobile phone bill that he uses for personal reasons, this would be considered a consumer debt. Frank Smith Plumbing owes a hardware store money for goods he used on a job several months ago. Because Frank Smith Plumbing is a business, this is considered a business debt.
Minimum value for debt collection
Debt collectors, DebtForce included, will generally only collect outstanding debt greater than $500. This is due to the amount of effort and work involved in both collecting and submitting the necessary information from the creditor. While the debt collector will usually find it is not worth the time due to the amount of work required for such little gain.
Payment Options for Debtors
When a debtor receives a payment request they usually have several payment options available to them
Payment Plan - if the creditor agrees to a payment plan, the debtor will be able to break down their debt over several payments to help with cashflow and give the debtor the greatest chance at paying
Credit Card - if the debtor would like to keep in good standing with the creditor, they may have the option of paying their debt down with their credit card
Bank Transfer - the most common payment type for debt collection is via bank account though if a business is struggling to pay their debts, they may have issues with cash flow
Why should I use a debt collection agency?
There are many reasons why a debt collection agency is beneficial to businesses. First, you will be getting what you're owed much more quickly than if it was done without help from one of these agencies. Second, there's the fact that collecting money for yourself can take up a lot of your time which could be better spent elsewhere. Lastly, some people may not want to pay because they feel like they don't owe anything when in reality they do and an experienced collector knows exactly how to approach this problem so that the debtor doesn't know he or she owes until payment has been made!
Businesses should use DebtForce for debt recovery services because we make sure all debts get collected on-time with no hassle involved; we also offer competitive rates and a range of options for debtors to make payment.
DebtForce helps businesses get what is owed by providing their expertise in the field of debt collection which can be highly valuable when it comes to collecting debts that are overdue. This guide has explained everything there is to know about why you need this service, how they work, including some benefits it could offer your business!
Check out our blog post if you would like to learn more around why you should use a debt recovery agency.
How does the debt collection process work?
DebtForce's debt collection practices follow a simple 3 step process as outlined below. Our ultimate goal is to collect the debt as quickly as possibly and avoid legal action as this can cause delays and costs.
1. Provide information on the debt
The debt collection process with DebtForce starts by providing as much information about the business that owes you money. What communications you have made with the debtor, and any payments that have been previously made. The more information you can provide, the better position we will be in to proceed with the debt collection.
Using the information you have submitted about the debtor, we verify that the business exists and is registered. We use the contact details provided to make contact advising the debtor that they have a debt due and provide them with a letter of demand.
2. Payment options for debtors
When a debtor receives a letter of demand and request for payment from DebtForce they are given several options to pay. The desired result is that the debtor makes full payment and the business owner can finally receive their money. For some debts, we do offer payment plans to debtors to help incentivise payment.
Once a debtor has agreed to a payment plan, we will continue to collect funds and disperse payments until the debt is completely paid off.
3. Continued recovery
If after 60 days a debtor fails to enter into a payment agreement or pay the amount owing in full, we can pass off the matter to our legal partners to advance through the courts in the form of legal action. This is usually only worth while for debts over a certain amount as you will now have up front costs.
How much do debt collectors charge?
A typical debt collector will charge a percentage of money collected, with the percentage scaling down the larger the debt gets. Other's will charge an up front fee as well as a percentage of money collected. DebtForce does not charge any up front fees, while you can view our commission schedule to view our pricing.