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How debt collection companies work

Debt collection companies are businesses that provide services to businesses with outstanding and delinquent balances on customer accounts.  Agencies of this type take up the process of collecting the past due balances, leaving your employees free to focus on other important matters.  While there is some variance in how debt collection agencies function, there are a few basics that are likely to apply.

Most debt collection companies offer services in return for either a flat percentage of whatever funds they collect on your behalf, or a small fee plus a percentage of those collected funds.  This means the costs of outsourcing the collection effort is kept to a minimum, and is often less expensive than continuing to manage the process in house.  Most will provide periodic updates on their progress, typically in the form of monthly reports that reflect the attempts made and any payment arrangements that have been put into place.  If multiple payments are involved in settling the debt, the report will usually reflect how much has actually been collected, the percentage deducted from the collected funds, and the amount forwarded to your company.

When considering the merits of different debt collection companies, pay close attention to the practices used to collect old debt, and the processes for forwarding the collected amounts to your company.  Also consider the fee schedule involved.  Keep in mind that the lowest fee does not automatically mean the best choice, and that going with a company with a marginal reputation in order to lock in that low fee could have repercussions that end up costing your company more than the effort is worth.

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