Debt collection, as you probably know, involves collecting money that is owed to you or your business from individuals or other businesses. There are rules and laws pertaining to how you may go about collecting these debts. They were established by the Fair Debt Collections Practices Act of 1977 and ensure that no debtor is harassed or abused in the pursuance of his debt.
Because most businesses are concerned about breaking any of these rules accidentally and because they simply don’t have time to collect on debts on their own, they outsource these tasks to in-house or third-party debt collection agencies. Both choices have their benefits and drawbacks, and it’s up to you to determine which one is the best fit for your needs.
In-house debt collection agencies are typically established and overseen by you, the business owner!
The downside, however, is that setting up and paying an in-house agency is very time-consuming and expensive! For companies that don’t want to hire a slew of collections employees, third-party debt collection is usually the better choice. The much lower cost is one of the main reasons why third party agencies are the most popular option among business owners.
Some third-party companies require you to pay only when a collection is received, in which case, they typically ask for a percentage of the money collected. Others just charge you one flat fee. Either option can be workable; it just all depends on your budget and how you prefer to pay.
Likewise, what type of collection agency you choose to work with is up to you, but it is highly advisable to work with a collection agency, rather than trying to handle everything on your own!