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Debt Collection Agencies

Debt collection agencies exist to help you collect on "bad debt," or money that you are owed but unable to obtain. Tracking down bad debtors and implementing a debt recovery solution yourself can be a drain of time and money that would be better spent elsewhere.

Hiring professional debt collectors is usually a preferable solution especially for a small business. A debt collection agency's methods and behavior will undoubtedly reflect on your company, however, so it is important that you choose an agency that has an above-board and respectable image.

When you hire a collections agency, the first thing they will do is send professional letters and possibly make phone calls to the delinquent debtors, in an effort to negotiate timely repayment. They are willing to sit down with debtors and negotiate a repayment schedule that meets the needs of both parties.

If the other party is not willing to cooperate, however, the collection agency will generally take them to court to settle the matter in front of a judge.

Before choosing an agency to help you with bad debt, it is important to consider the agency's average recovery rate (what percentage of the money owed they usually recover), along with their commission on recovered. Most debt collectors will charge a commission of 20% to 35%, and reliable agencies will gladly tell you their recovery rates.

Only by subtracting commission from average recovery rate can you calculate whether or not you're getting a good deal.

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