There are two main types of collection agencies. The first type is called a consumer collection agency, and they specialize in collecting debt from consumers. For example, a credit card company may hire a consumer collection agency to recover payments from delinquent accounts.
The second type of collection agency is called a commercial collection agency. Also known as a business-to-business (B2B) collection agency, this type of firm specializes in collecting debt for businesses from other businesses.
Always Partner with An Ethical Agency
Whether you’re hiring a consumer or commercial collection agency — you must partner with an ethical firm that treats people with dignity and respect instead of using underhanded tactics like harassment, threats, blackmail, etc.
Remember, there are people behind every business, whether it’s the human resources, finance, or accounting department. People respond more positively to a professional attitude and don’t take kindly to insults or emotional blackmail. That’s why your company is more likely to collectmoney from another business when an ethical collection agency is involved rather than an immoral one.
Demand Letters and Phone Calls
It’s critical to act fast when your invoices have been paid, and your reminders, phone calls, and emails have been ignored. Studies show that debt grows much more difficult to recover with time. In times of economic uncertainty, you don’t want to be beaten to the punch by your debtor’s other creditors, especially if they’re considering declaring bankruptcy.
Always watch out for red flags. If your debtor is suffering from high labor turnover, is suffering low company morale, or their stock value is falling, then don’t hesitate to partner with an ethical B2B collection agency.
After the intake call and some investigation, almost all collection agencies start with a demand letter and phone call campaign. Usually, this is enough to recover your payment. Most businesses tend to take their debts more critically after a reputable collection agency is involved.
They may finally realize that the matter is severe and immediately pay their dues or offer an installment to avoid denting their reputation in the business community or hurting their relationships with their business partners.
Negotiation
If a business doesn’t pay after demand letters or phone calls, they may negotiate with your debt collection agency. A licensed and experienced debt collector has the skill to convince debtors to agree to payment plans or a smaller, more manageable payment.
Credit Reporting
When a business refuses to cooperate with a collection agency, they may be reported to the major credit bureaus by the agency. Remember, businesses value their credit reports and credit scores. Red flags on a credit report can hurt a company’s ability to secure investments and funding from banks and other lenders. Likewise, it can hurt their ability to secure a bridge loan. At the very least, they may have to repay their loans with higher interest rates.
If all else fails, a resourceful B2B collection agency can start the litigation process after completing a financial investigation of the debtor. Of course, any major step will be taken by the agency with your written consent. These are just some of the weapons in a B2B collection agency’s armory.
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