Most small to mid-sized businesses--and particularly start-ups--extend credit in order to build momentum. The problem with extending credit in the B2B environment is that many times repayment can get spotty. Bill collection can become difficult, especially if there arent full-time resources to devote to the process.
Its at this point where most businesses consider taking on a third-party business collection agency. Now most CEOs agree that outsourcing often costs some of the control of the process. But in the realm of bill collection, thats a good thing. Knowing federal regulations, minding accurate record-keeping, and performing timely follow-up can cost big money to handle in-house.
Bill Collection Woes: Lawsuits Mount Up
The penalties for unorganized or unscrupulous collections practices are well-documented. According to the Birmingham News, law suits against organizations trying to collect on outstanding debts exploded 295 percent from 2007-2008 to 2008-2009. Most of that litigation related to the Fair Debt Collection Practices Act--a piece of legislation aimed at curbing lying, harassing, misleading, and abusive tactics towards debtors.
And thats precisely the point. Knowing the complex rules of bill collection is a job in and of itself. The processes and protections change frequently--without dedicated staff members staying on top of things, many businesses leave themselves open to legal action with every collection attempt.
The Rise of the Business Collection Agency
An inside look at a typical bill collection agency reveals the surge that is typical of this industry. The Huffington Post journeyed into the inner-sanctum of The Affiliated Group, a Minnesota-based collection company--and the action at their call desk was eye-opening. 175 dedicated phone lines with operators never idle for longer than 30 seconds. Most inquiries came from medical facilities and utility companies.
Economic trends that should continue to fuel the demand for business collection agency services include:
- Consumer savings accounts dwindling
- Potential economic recovery, prompting more credit offers
- Businesses missing traditional financing offers and calling in debt
What to Look for in Bill Collection Outsourcing
Thumbing through the yellow pages for a bill collection agency is not always the savviest tactic for finding a partner in this endeavor. There are thousands of companies that offer these services--both exclusively and as part of a suite of business solutions. An article in the MetroWest Daily News outlines some of the aspects of a quality bill collection service:
- Knowledge. Of collections regulation--meaning what can and cant be done to recover debt
- Character. Approaching each collections attempt with a friendly, yet businesslike demeanor
- Resources. Including ample account representatives and technological tools to collect in a timely fashion
Because successful bill collection can increase cash flow and encourage expansion, outsourcing these activities to a third party business collection agency is a smart move for any size business.
Sources
Metro West Daily News
Alabama Live
Huffington Post
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