Why a Collection Agency Is Your Small
Business’s Best Friend--Really
Copyright © 2005 Steve Austin


Does the term “collection agency” put you on edge? If you’re like 
many small business owners, the mountain of debt you accumulated 
during startup might have been enough to make you worry about 
collection agencies every time you answered the phone. But your 
feelings toward collection agencies are eventually going to 
change, if they haven’t already.

While no one wants to hire a collection agency, it’s a sad 
reality of doing business that not every customer feels the need 
to pay, or has the ability to pay all at once. If you want to 
stay in business, you’ll need to collect that money. When your 
most polite and not-so-polite reminders to pay have failed, 
you’ll need to start getting serious, which means going to an 
agency.


Small Business Collection Agency Services: More Benefits than 
Costs

Small business collection agency services will certainly cost 
more than just writing letters demanding your money back. But the 
amount of money you’ll collect, not to mention the time you’ll 
save, will more than pay it back. In fact, when you consider the 
hourly rate of your employees, or you yourself, collection 
agencies’ fees really can be quite a bargain.

Let’s say you have an assistant your business pays $10/hour, 
effectively costing your business $15/hour once you count in 
employment taxes, benefits, and the overhead of your office. You 
would be lucky if that assistant spent just five hours total on 
each debt, and managed to collect half of them. But you would 
have sunk $150 into each successful collection. Plus, there’s the 
opportunity cost: $150 worth of time you haven’t spent in growing 
your business. So the net loss is $300, and probably more if 
you’re a profitable business that gets a good return on your 
people’s time.

But if you refer your delinquent debts to a collection agency 
for $75 each, and they collect three-quarters of them, you’ve 
invested only $100 per debt collected. Once you factor in all the 
money from all the debts the agency collected for you that you 
couldn’t have collected on your own, the return on investment is 
huge. That’s not even counting the saved opportunity cost, or 
all the stress you’ll save yourself and your associates.

In the end, your small business has to focus on doing what brings 
in the money: your core business. Leave your taxes to your 
accountant, your office repairs to your building manager, and 
your collections to your small business collection agency.

Steve Austin is a regular contributor to Collection Agency 
Information (http://www.collection-agency-information.com), 
a website with articles on choosing a small business 
collection agency along with reviews of agencies, with links
to their websites. 
http://www.collection-agency-information.com/

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