Seeing no benefits to using a collection agency is by far the most frequent objection that I receive when talking with potential clients. They fall into two catagories: those that just make so much money/profit and those that don't want to offend their non-paying customers by placing them for collection.
Huh?
What's wrong with "free" or "found" money going directly to the bottom line? Why worry if you make a former customer angry, they are using one of their competitors by now anyway. Another concern is that they will bad mouth you in retaliation...well, you can be sure that they are not out there singing your praises once they fall past due. They have moved on and so should the business by sending their accounts to a collection agency.
There is a saying " there is no such thing as an unpaid bill". Business compensate by raising their prices for those of us that do pay our bills.

Attorneys have problems collecting their fees

I read an article by by Nora Lockwood Tooher, Dolan Media newswires this morning concerning attorneys unable to collect their fees from clients....yes attorneys have collection problems, too!

The article stated that many attorneys are reluctant to sue their clients for past due fees because the suit can trigger a malpractice claim or a disciplinary complaint to the Bar Association regardless of any merit. In addition, some malpractice insurance carriers have riders in their policies prohibiting the attorney from suing their clients for past due fees.

A logical alternative is for an attorney to use a collection agency to collect those past due fees. At JP&C, we collect for several law firms and some of those attorney clients did receive complaints about their services at the Bar Association. One could argue that the complaints were frivilous, why didn't the debtor client file the complaint before the account was placed for collection?

This happens with other, non attorney clients as well. The debtor does not have the money to pay the bill so retaliates with a complaint to an appropriate regulatory agency if there is one. Even if there is no formal complaint filed, all of a sudden the bill is disputed, the first time our clients have ever been notified that their customer was unhappy with the service.

At that point, we try to find out how much the debtor does feel that they owe which allows us to at least determine if the debtor just doesn't have the money or get a settlement for our client.

You too can use that tactic with your customers who are disputing a portion of their bill and you will get payments that you might otherwise not receive.

Poor credit = poor chances of getting a job?

An article in the Austin American Statesman's Sunday edition described a growing number of employers practice of using an applicant's credit record as a factor in the hiring process.
That doesn't mean that the server behind the counter at Burger King has an 800 FICO score but it could mean those looking for financial and mid and high level jobs will have their credit ratings placed under greater scrutiny.
And why not? In a tight job market, why not get the best available candidates that HAVE GOOD CREDIT? The theory is that people with good credit behave more responsibly and are less likely to be tempted to steal from their employers. Studies by automobile insurance companies show that those insured with good credit are, in general, better drivers thereby having fewer claims and creating more profit for the insurance company.
The bottom line is that a dinged credit report can have much greater consequences than just preventing a consumer from getting a loan and either keeping your credit report in good shape or cleaning up a less than good credit report is more important now than ever.

Two types of collection agencies

There are two main types of collection agencies, those that operate ONLY on a percentage of what they collect and those that charge a flat rate per account placed or sell the right to place a certain number of accounts within a certain amount of time for a flat fee.
I'm a member of several credit and collection organizations and groups and this morning a PR piece about an agency was part of one of those groups. That agency charges $5-$15 per account placed regardless of dollar amount and they claim that a gentle nudge is all most people need to pay and that's why they can charge so little.
As a 20+ year veteran of the collection industry, I have learned that a very, very small percentage will respond to letters from a collection agency. Phone calls are what generates payments, if letters and invoices did, there would not be over 5,000 collection agencies in the US alone.
As a contingency agency, J P & C gets paid ONLY if we collect for our clients while the other type agency gets paid whether they collect any money for you or not. As a collection agency owner, I know that they cannot afford to spend any money on phone calls, more that a letter or two or trying to locate a missing person that owes the money and stay in business very long.
While it may seem like a bargain to pay $15 for someone to collect a $1000 account, the bottom line, who is more motivated to do a good job for you, someone who already has your money beforehand or someone who relys on getting results for their clients BEFORE the agency can get paid?

tough times demand NOT so tough techniques

It is a common misconception that a debt collector, whether with a collection agency or with a company collecting their own past due accounts will be more effective if they are hard nosed with the debtor.
That technique may work with a few people out there but for the most part and in this economy, you had better be nice and in a problem solving mode or your bill is going to the bottom of the pile to be paid.
What's one to do differently? Well, add persistance to your list of tools. In the past you may have contacted your accounts once a month, maybe twice and you were a little more firm with the terms of the debt on each call.
Consider calling more frequently, keeping the calls shorter and more relaxed in tone. After a while, your persistance will pay off in increased visibility. You can still manage the same number of accounts even though you are calling more often because you are spending less time on the phone.
Don't take my word for it, try it for two weeks to see if it helps and let me know how it worked out for you.

Medical accounts collections

By far, medical bills comprise the majority of accounts placed with collection agencies, not because the the doctors are heartless but because of the sheer volume of unpaid medical bills.
To give you an idea of how the average consumer prioritizes their medical debt, consider that a collection agency will receive a payment, not necessarily payment in full, on only 1 in 4 accounts placed. Put another way, 3 out of 4 medical accounts at a collection agency will never receive a payment at all. Would you buy a lottery ticket with those odds?

Here at JP&C, we have a debtor with an $80 medical bill placed in 2007. She buys a money order for $2 every month and sends it in to be applied to her debt. She has never responded to our phone calls or letters so we don't know if she is sending the $2 as a statement of displeasure or because that's all she can afford and wants to do the right thing.

I believe it's a statement and it's one that I admire and applaud.

Sad but true

Have you ever wondered why companies and medical practices turn their past due accounts over to a collection agency? To hear a lot of reactions from the debtors, you would think it is for revenge or to be just plain mean. It's not of course, it's because the creditors are OWED the money and they want to be paid. In some cases whether or not the creditor gets paid can mean the difference between staying in business or NOT!
I had a publishing client call recently and he told me that he is shutting down and trying to sell one of his magazines because NOT ENOUGH ADVERTISERS ARE PAYING THEIR DEBT to justify keeping the money losing publication alive.
We also her debtors complain that "the doctors" make enough money so if they don't pay their bill, it's no big deal to the doctor. What these patients don't consider is that most medical practices have considerable overhead and most doctors begins practice with literally hundreds of thousands of dollars of student loans that need to be repaid.
In this economy, it will pay you to turn your accounts receivable over to your collection agency sooner than you might currently be placing those accounts. A/R are not like a fine wine, they do not get better with age.