Does the term ï¿½collection agencyï¿½ put you on edge? If youï¿½re like many small business owners, the mountain of debt you accumulated during startup might have been enough to make you worry about collection agencies every time you answered the phone. But your feelings toward collection agencies are eventually going to change, if they havenï¿½t already.
While no one wants to hire a collection agency, itï¿½s a sad reality of doing business that not every customer feels the need to pay, or has the ability to pay all at once. If you want to stay in business, youï¿½ll need to collect that money. When your most polite and not-so-polite reminders to pay have failed, youï¿½ll need to start getting serious, which means going to an agency.
Small Business Collection Agency Services: More Benefits than Costs
Small business collection agency services will certainly cost more than just writing letters demanding your money back. But the amount of money youï¿½ll collect, not to mention the time youï¿½ll save, will more than pay it back. In fact, when you consider the hourly rate of your employees, or you yourself, collection agenciesï¿½ fees really can be quite a bargain.
Letï¿½s say you have an assistant your business pays $10/hour, effectively costing your business $15/hour once you count in employment taxes, benefits, and the overhead of your office. You would be lucky if that assistant spent just five hours total on each debt, and managed to collect half of them. But you would have sunk $150 into each successful collection. Plus, thereï¿½s the opportunity cost: $150 worth of time you havenï¿½t spent in growing your business. So the net loss is $300, and probably more if youï¿½re a profitable business that gets a good return on your peopleï¿½s time.
But if you refer your delinquent debts to a collection agency for $75 each, and they collect three-quarters of them, youï¿½ve invested only $100 per debt collected. Once you factor in all the money from all the debts the agency collected for you that you couldnï¿½t have collected on your own, the return on investment is huge. Thatï¿½s not even counting the saved opportunity cost, or all the stress youï¿½ll save yourself and your associates.
In the end, your small business has to focus on doing what brings in the money: your core business. Leave your taxes to your accountant, your office repairs to your building manager, and your collections to your small business collection agency.
About the author:
Steve Austin is a regular contributor to Collection Agency Information (http://www.collection-agency-information.com), a website with articles on choosing a small business collection agency, along with reviews of agencies, with links to their websites.
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