October 23, 2012 by Rick B
A well-established collection agency can do much more for you than recover past-due receivables.
Last week we had the opportunity to discuss the primary functions of a collection agency; recovering your debt. This week we turn our focus to the secondary service offerings of collection agencies.
A lot of times in this industry, people use the term accounts receivable management synonymously with debt collection, but that is not always the case. Sometimes, and this is true with us, accounts receivable management refers to group of ancillary programs offered to work as an extension to your business office.
As the name may imply, collection agencies are primarily recognized for their ability to effectively recover past-due debt. The plethora of bad debt that plagues businesses today keeps collection agencies, for lack of a better word, busy. Collection agencies can also do more than collect your bad debt, we are good at collecting or managing any or all of your accounts receivables—that’s to say, collect any money due to you.
I once read that consumers with bad debt fall into one of the following three categories:
1) People who want to pay their bills, but do not have the means
2) People who like to put off paying their bills, but will eventually pay
3) People who will do anything they can not to pay their debts
Not every debtor will fall into one of these 3 categories, but the vast majority probably fit one of the above mentioned descriptions. The third group, people who will do anything to avoid paying their debts, will most likely end up in collections, and possibly litigation—if people don’t want to pay, it will take a concerted effort to recover the money they owe. The programs we’ll discuss today are really for the first 2 groups, they are meant to expedite your revenue cycle.
Collection agencies have many names to describe their programs, for continuity, I’ll be using the lingo we employ at UCS. The following programs are extremely cost-efficient when utilized with traditional collection services:
Business office extension: Our tagline for this program is, “let our employees work as your employees.” The main function of this program is to save your employees from the time-consuming task of A/R management. Agencies can send out and follow up on your invoices, and set up a virtual call center. All correspondence is sent on your letter head, and phone calls are made from your business. If your business is called Joe’s Trucking, the phone will be answered as “Joe’s Trucking payment center,” —our relationship with your customers is completely transparent.
Early-Outs: This is for the consumer that only needs a gentle reminder of their outstanding debt. A series of letter are sent out—on your letter head, notifying the consumer of their unpaid debt. If necessary, a follow up phone call can be made. This program helps facilitate payment, speeds up your revenue cycle, and saves money by preventing the need for full collections.
Payment Monitoring: Just as the name implies, if a payment plan has been agreed upon, an agency can follow-up with monitoring the payment. This program usually starts with sending the debtor a copy of the payment agreement and follows with a reminder and/ or phone call before each and every payment is due. This program, like most, can vary agency to agency, but you get the idea. This program can free up precious hours for your employees, and let’s them focus on their core job functions.
Pre-closing: If you are selling your business, or implementing a new A/R program, some agencies will assist with closing out and recovering the debts from your existing system.
The above mentioned are available for one reason: to increase your revenue cycle. These economical solutions will generally save a business two of their most precious resources—time and money.
There is another program that can also be included when talking about accounts receivable management, Insurance Claims Collections. This can also be a stand alone program, so we’ll dive into that next week.