In-House Debt Collection Vs Commercial Collection Agency

If you’re facing the problem of mounting dues from your customers, then you need to be very serious about debt recovery in order to maintain a healthy cash flow. Overdue payments from certain customers are a reality of every business. However the problem needs to be tackled efficiently and quickly in order to not let it grow big and hamper your business.

When faced with such a scenario, you will have two options in front of you. You can create a dedicated in-house department for debt recovery and full-time or part-time employees for the department. The second option is to engage a debt collection agency to do the needful. Both the options will have their inherent advantages and disadvantages which are as follows:

In-house debt collection department versus commercial collection agency

Expenses: the in-house department will put the continuous financial burden on your business, as the employees will have to be paid irrespective of whether you have unpaid dues or not. In addition to that they will be certain other fixed costs of running a separate department which will have to be borne by your business. In the second option, payment can be made for every debt recovery made by the commercial collection agency, and hence you pay when you use their services, and to pay only for the services you use.

Knowledge: the commercial collection agency will be experts in debt recovery. They would know all the laws, strategies, techniques and negotiation points for making the delinquent customers pay up. On the other hand, the employs in the in-house department might not be so knowledgeable about debt recovery.

Experience: the commercial collection agency will have a vast experience of serving a range of customers across industries. Hence they would know the techniques that work in getting the customers to pay up on the other hand. The employees in the in-house department might not have such a vast experience, and hence they might use outdated strategies which would prove to be less effective.

Training: the debt collection agency would be responsible for providing training to its employees and bring them updated about the changes in laws and various other matters. On the other hand, engaging in-house employees would require you to arrange for their training, causing additional financial burden on your business.

Legal matters: a multipronged approach is required for debt recovery. It is likely that in many cases legal proceedings have to be initiated in order to get the customers to pay up. A commercial collection agency would be having legal experts associated with them who will handle these legal proceedings, and their fees will be built into the overall service charges of the commercial collection agency In case you go for an in-house collection department, separate lawyers have to be engaged to handle these matters. Their fees have to be paid over and above the regular expenses of the department, causing additional financial burden to your business.

Due to these benefits, it is better to engage a commercial collection agency, irrespective of whether your business is small or large.