Why a Collection Agency Is Your Small Business’s Best Friend Really

by Steve Austin

Published on this site: May 4th, 2005 - See more articles from this month...

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 choosing http://www.collection-agency-information.com/">small business collection agency, along with reviews of agencies, with links to their websites.