A collection agency is a company that handles unpaid invoices for your business by contacting the debtor and working with them to come up with a repayment plan. Unpaid invoices are submitted to a debt collector after multiple unsuccessful attempts have been made to collect the money.
How Collection Agencies Work:
1. Your business makes multiple attempts to collect debt without success.
You have made multiple phone calls and even sent emails and letters, but the deadline for your customer to pay you has passed. Now, you can send them a notice that the debt has been assigned and they will be connected by a collection agency.
2. You assign the debt to a debt collection agency.
Find a trusted collection agency for small business and assign the debt to them. They will need the original invoice and any other information that you have about the debtor.
3. The agency works on your behalf.
At this point, the collections agency takes full responsibility for getting your money. They will regularly call and email the debtor. Their goal is to speak with them and make a repayment plan. They will either try to get the money up front or in installments.
4. Eventually, the debtor pays the collection agency.
Once the agency has collected the money, they pass it on to you after subtracting their fee. If they are unsuccessful, they can report the debtor to a credit bureau.
What is a collection agency?
A collection agency is a company that performs debt collection services for a fee. They can contact a debtor on your behalf and work with them to establish a plan for debt repayment.
What is the price range for debt collection?
Debt collection can cost anywhere between 20% and 30% of the amount that your business is owed. The rate may go up as the debt gets older.
How long does it take before a collection agency reports to a credit bureau?
By law, collection agencies must wait 30 days after their initial contact with a debtor before reporting to a credit bureau. If the debt gets reported, the debtor's credit score will likely be affected in a negative way.
What is the American Medical Collection Agency?
The America Medical Collection Agency is a medical collection agency that specializes in collecting unpaid medical bills. Every year millions of patients skip out on their medical bills, so debt collection in healthcare is big business.
Do you have a list of debt collection agencies?
What is an IRS protection agency?
The IRS contracts four different collection agencies to collect unpaid tax revenue from individuals and corporations. These agencies are authorized by the federal government to collect tax debt.
What does it mean when a business is paying a settlement to a collection agency?
A settlement is an amount that both parties agree on to settle the debt, but it is not the original amount of the debt. A settlement provides a way for both sides to close the account, even though the debtor could still be reported to a credit bureau for failing to pay the full amount.
Can my business hire the Credit Protection Association (CPA) collection agency?
Yes. The Credit Protection Association (CPA) collection agency is available for debt collection just like any other agency in the business. If you want to hire a collection agency like the CPA, all you need to do is contact them.
What happens if you don't pay a collection agency?
Failure to pay a collection agency can have serious consequences. The most immediate consequence is that your credit rating will go down, but beyond that, you could be sued and expose your business to major financial complications.