7 Critical Reasons to Retain a Third Party Collection Agency

Why Retain a Third Party Debt Collection Agency For Your B2B Debt? Here Are 7 Critical Reasons To Consider. 

Cash flow management is one of the most critical aspects of running a business. It’s how you pay your staff on time, pay your vendors, stock up on inventory, and secure funds for expansion into new markets.

Following up on overdue payments from the organizations you do business with is the key to maintaining a healthy cash flow. Slow payers and debt defaulters can harm your business. Without the money you need to run your enterprise, it becomes impossible to stay afloat.

However, this can often require an endless series of phone calls and an infinite number of demand letters and emails to delinquent debtors. If your time or resources are limited or your efforts have proven futile so far, hiring a third-party debt collection agency could prove worthwhile for your enterprise.

While there are several benefits to retaining credit collection services for your organization, these some of the most critical:

1. Legal Protection and Compliance

Countries and states have varying laws and regulations that govern debt collection and debt collection practices. The more time goes by, the more difficult it becomes to collect debts.

It’s best not to underestimate the lengths delinquent debtors would go to avoid settling their overdue accounts. A well-informed entity will not hesitate to file a civil suit against you and your company if your collection practices and actions go against what the law prescribes.  Debt collection agencies are well-versed in federal, state, and even international law as far as foreign debt collection matters are concerned.

Hiring a collection service to recover overdue accounts on behalf of your business protects you against any potential legal repercussions that may result from attempting to recover debt on a delinquent account on your own.

Additionally, a third-party debt collection agency ensures that your company complies with the provisions of the Sarbanes-Oxley Act of 2002. This Act was established to offer protection to investors, shareholders, and the general public from errors in accounting and fraudulent financial practices.

A debt collection agency can help your firm demonstrate that its internal controls, alongside the financial accounting framework it has in place, meet the requirements set out by the Act. It will not only prove your company’s due diligence but may also minimize any associated consultancy expenses.

2. Efficient and Effective Debt Recovery

A reputable debt collection agency has a wide array of tools and resources at its disposal to help businesses recover commercial debts. A company trying to recover delinquent debts on its own can accrue a massive amount of legal fees and other costs, not to mention the loss of time.

Advanced collection methods such as skip-tracing, asset location, credit history analysis, and public record searches speed up domestic and international debt recovery processes tremendously. Most businesses do not have access to the tools necessary to pursue these methods, making it impossible for them to recover delinquent debt quickly and cost-effectively independently.

3. Litigation and Tax Documentation

A US debt collector pursuing domestic or overseas debt collection keeps a detailed record of every interaction they have with delinquent debtors. This is extremely helpful in cases where the ultimate recourse is to file a lawsuit against the debtor for the unpaid debt.

Alternatively, suppose you decide to write off the outstanding amount as bad debt and are looking to claim it as a tax deduction for your business. In that case, the IRS needs to see supporting documentation to that effect. The documentation provided by a commercial collection agency would show that your company exhausted all the available avenues before it decided to write it off and claim it as a deduction.

4. Accounts Receivable Management Services

A third-party debt collection agency can provide your company with domestic and international receivables management services. Slow payers and unpaid invoices can have a devastating impact on your business’s cash flow. By outsourcing your accounts receivable management, your in-house accounting team doesn’t need to spend valuable time and resources chasing after pending invoices.

5. Financial Advice and Support

Debt collections agencies specialize in credit management. Given that this is their area of expertise, it puts them in a unique position to give you invaluable information and advice that could strengthen your firm’s financial position.

They can give you tips on managing and ramping up your cash flow and valuable strategies for getting your business out of debt. They can even give you practical advice on screening prospective commercial clients to identify slow payers or those facing liquidity issues.

6. Undivided Focus

Business owners frequently have several priorities they’re juggling at any given time.

On the other hand, a debt recovery agency has just one fundamental objective: to collect unpaid debts. This gives them all the time necessary to dedicate their energy and resources to debt recovery – a luxury that most businesses don’t have.

This undivided focus is what ultimately allows debt collection agencies to get rapid collection activity results. Any past due accounts your business has will get the full, unlimited attention of the collection agency, freeing you up to focus on running your business without distraction.

7. Leave It to the Experts

In an ideal world, your business would receive immediate payment for any products sold or services rendered. Unfortunately, the business world is anything but ideal. Granted, clients who settle their accounts on time do exist. However, if you’ve been in business long enough, you know that not all clients are reliable.

Retaining a third-party debt collection agency gives you more control over the critical aspects of running your business and helps manage that ever-growing pile of pending invoices. Not only does it minimize the legal risks to your company, but it also makes for an efficient and effective recovery process.

Bottom line: leave it to the experts to chase the debt so you can focus on pursuing growth.

Did you find this information helpful? If so, be sure to check out our blog to learn how to choose a collection agency.

STA International – a management-owned business founded in 1955 – is a full-service commercial debt collection agency, providing commercial collections nationwide. We offer services that include US Debt Collection, International Debt Collection, Receivables Management, and Skip Tracing. With a reputation built upon professionalism and integrity, STA International is the ideal collection agency to represent your organization.

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