Friday, September 20, 2013

The Hidden Costs of Using a CHEAP Collection Agency for Commercial Debt Collection

The Hidden Costs of using a CHEAP collection agency for commercial debt collection

"The only thing more expensive than hiring an expert - is hiring an amateur" - Red Adair

After 20 years in commercial collections it is always amazing to observe companies who base their choice for a collection agency, solely on cost. With the present economy I understand and sympathize. What I don’t understand is why companies take the cheap route and are then surprised by the lack of tangible results.   

Reputable companies that make decisions based strictly on the lowest bid don’t realize, or choose to ignore, the risk to their reputation and potential financial liability. The reason many collection agencies offer CHEAP rates is because they cut corners. This is especially true with commercial debt collection.

When considering a collection agency to collect your commercial debt consider what happens when an agency cuts corners, BEFORE making a decision solely based on the cheapest rate.

CHEAP collection agencies have cheap staff.  The main reason cheap collection agencies always have lower recovery rates are because their staff lacks proper training and commercial knowledge. The modus operandi of these cheap agencies is to try and blindly collect commercial accounts using consumer collection tools and tactics.

Commercial debt collection requires the highest skill level and experience in the collection industry. It takes years to learn the intricacies of commercial credit. Professional commercial collectors with this type of experience don’t come cheap. The end result with a cheap agency is their cheap rates deliver a lower return compared to a professional commercial agency with higher rates. 

CHEAP staff make stupid mistakes. Commercial debt collection is a specialized field and a consumer collector is prone to leaving money on the table, because they lack knowledge. The big problem here from a Client perspective is mistakes come with a cost. Big mistakes can also have big liabilities attached.

A collector, who enters the commercial collection arena, without being armed by training and knowledge, is like a fool walking with your reputation though a field of liability landmines. Professional commercial collectors avoid land mines and protect your reputation.

CHEAP collection agencies fly blind when they try and collect. Commercial accounts usually require more intensive research than consumer. Cheap agencies with cheap rates can’t afford to properly research a commercial debtor company. Even though an account may be tens of thousands of dollars they will cut corners and just fly blind into a collection.

A professional information infrastructure is very expensive to set up and maintain. Cheap rates mean no margin for a proper commercial information infrastructure. It is the customer who actually suffers from a poor infrastructure with low recovery rates.

Experience is everything. Often, a professional commercial collector with 10 or 20 years’ experience can accomplish more in one phone call, than an amateur in 10 calls. Commercial debtors are more debt savvy than consumer debtors and commercial collections have more loopholes. A professional knows how to close the loopholes and get paid.

Experience knows the local business landscape and the applicable laws in each Province or State. A professional knows what levers to use for prompt payment.

CHEAP agencies don’t come with any Perks. A professional commercial collection agency offers valuable advice while a cheap agency remains silent. Frequently for example, a commercial collector will run across a faulty credit agreement. While the cheap agency doesn’t even recognize the problem the professional agency will suggest some minor changes that reduce future risk.

These are just some of the ricochet effects when cheap agencies venture into the commercial debt collection arena. You get what you pay for and choosing a commercial collection agency is no exception. This is why so many companies use PCR for commercial collections. Protecting our Clients from the stupidity above is part of how WE PROTECT YOUR CORPORATE HEARTBEAT.