Why a Collection Agency Is Your Small Business's Best Friend


Does the term "collection agency" put you on edge? If you're 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 haven't already.

While no one wants to hire a collection agency, it's 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, you'll need to collect
that money. When your most polite and not-so-polite reminders to pay have
failed, you'll 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 you'll
collect, not to mention the time you'll save, will more than pay it back.
In fact, when you consider the hourly rate of your employees, or you
yourself, collection agencies' fees really can be quite a bargain.

Let's 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, there's
the opportunity cost: $150 worth of time you haven't spent in growing your
business. So the net loss is $300, and probably more if you're a profitable
business that gets a good return on your people's time.

But if you refer your delinquent debts to a collection agency for $75 each,
and they collect three-quarters of them, you've invested only $100 per debt
collected. Once you factor in all the money from all the debts the agency
collected for you that you couldn't have collected on your own, the return
on investment is huge. That's not even counting the saved opportunity cost,
or all the stress you'll 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.

Steve Austin is a regular contributor to Collection Agency Information
(http://www.collection-agency-information.com), a website with articles on
href="http://www.collection-agency-information.com/collection-agency-article
s/Small-Business-Collection-Agency.html">choosing a small business
collection agency, along with reviews of agencies, with links to their
websites.