The World Bank estimates that about 80.3% of all business deals in the world are done on some form of credit. However, about half of all those debts are either paid late or end up as bad debts. To avoid losing your money and also keep a generally good relationship with the customer,the services of collection agencies are required. So, what is a collection agency? A collection agency is a business establishment that specializes in collecting cash from those who owe your business money.
What You Need To Know About Collection Agencies
Why are their services required? You see, the process of collecting a debt is one you not want to get into as it can be stressful. It may also require a lot of time to contact the particular customer as well as to negotiate with them. Furthermore, having your debt collected by a third party is more likely to be taken seriously than if you do it yourself.
Two types of collection agencies exist: first-party and third-party agencies. First-party agencies are a part of the company that owns the actual debt. However, such agencies are only available in big companies as they are expensive to establish and maintain. On the other hand, you only contact third-party collection agencies when and if you need their services. Most at times, the third-party collection agency gets a percentage of the debt collected. You may also agree that the collection agency buys the whole debt from you. In this case, you will not be owed cash by anyone.
After you agree on the terms, they send a letter to the debtor. This letter emphasizes on the need for the debt to be paid in a specific period of time. This first letter does not have a lot of details; it is more or less a reminder. If the debtor does not honor the requests in the letter, a demand letter follows. It specifies the amount owed and the additional time to pay in order for the case not to be taken to court. The other option in the collectors hands is to report the debtor to credit bureaus and other such institutions.
What You Need To Know About Collection Agencies
Collection agencies are not allowed to seize any asset to recover the debt, unless they get a court order. Any letters sent to the debtor should not have anything on them that would embarrass the debtor. Specific rules also apply when a collection agency calls a debtor.
The work of collection agencies is one that is done with utmost privacy and governed by strict laws. Consequently, you need to choose a collection agency that is duly registered by the authorities in your areas. It would also be wise to find out their success rate. To increase the chance of having your debt collected by a credible agency, it should be as fresh as possible. The older the debt is, the lesser the chance of it being collected. Now that you know what a collection agency is; your money need not be lost. Increase the chances of having your cash back by calling one.