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Using a Debt Collection Agency

As economic times become tougher, more and more businesses are finding that they are facing hard times and having trouble meeting their commitments.
Many businesses have started working harder and smarter to attract new customers and retain the old ones, only to find that, while their sales are up, they are, increasingly, having  trouble meeting their end of month commitments. This is due to the amount of bad debts and slow payments most businesses are now experiencing.
Many business owners have come through a long period of relatively good times without having to learn the art of debt collection. Most adopt the attitude of being patient and hoping that they get paid, even though they are themselves in desperate need of the money to help their own cash flow. They are reluctant to start debt collection procedures, believing them to be costly and also afraid that the customer will take offence and they will loose further sales.

Some points to remember when considering your debt collection options are:

1) Most reputable debt collection agencies charge a very small "up front" fee, and mainly work on a commission basis, taking a percentage of the recovered debt as payment. While, with this method, you wont receive the full debt that you may get if you wait long enough AND your debtor does indeed pay you,  the old adage that some money is better than none must surely apply here.

2) Many businesses have a "terms of trade" which states that the cost of recovering a debt can be added to that debt, meaning that the business owner will receive full payment of his debt and the debt collection agencies commission will be added to the debt. If you don't have a terms of trade it is important that you rectify this as soon as possible.

3) Debt collection does not necessarily have to ruin your relationship with your customer. A reputable collection firm can often collect a debt without harming that relationship. Collection agents are professionals (many of them are women), who approach the problem with understanding and tact.
If a customer chooses not to use your business again after a debt has been collected it could be that they were only dealing with you to make use of you lax debt control in the first place, and is this type of customer the sort that you need. A customer that is consistently late in paying is, in effect, using your overdraft facilities so you are actually selling him your product at the agreed price LESS your overdraft interest. If you do your calculations with this in mind you will probably find that there is little or no profit in the sale, and you would be just as well of without that customer.

4) Not all debt collection agencies are equal.  As the economic times become tougher, we are seeing the growth of new collection firms entering the market, many of these are using inexperienced collection agents and questionable debt collection methods. You are far better to seek out a long established agency with a solid reputation remembering that this firm will be working in your name and ultimately it is your reputation at stake. Remember also that the whole point in using a debt collection agency is to collect your debts and help your cash flow, This is more likely to happen if you use experienced collection agents with a long and successful history in this field.

About the Author
More information about  Debt Collection and debt recovery is available at and includes helpful information on debt collection throughout New Zealand. Guardian Credit has been a leading New Zealand Debt Collection Agency since 1995.


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Articles - Using a Debt Collection Agency

Debt Recovery - Credit Control Management - Overdue Accounts Collected