View More Articles on Collections
When it comes to pricing, what's the best option when placing accounts with an outside collection agency?
From the client's perspective, the most advantageous form of pricing on third party collections is a contingent fee, based on the amount actually collected. With this pricing format:
- You have no payment liability to the collection service unless money is actually recovered (except in the case of law suits where you had previously approved the advancement of costs).
- The service provider is highly motivated to bring resources and energy to bear on maximizing recovery on your accounts, since they receive no fee if they don't collect.
- Individual collectors are focused on results since, very often, their compensation package is made up of a base salary plus a bonus for dollars collected.
- As you charge off delinquent accounts that are forwarded to the outside collection agency, payment of the agency's fees will not negatively impact your balance sheet. Collection of these accounts, on the other hand, results in "bad debt recovery" and has a positive impact on your bad debt reserve.
Subscribe to the Credit-to-Cash Advisor
Monthly e-Newsletter -- It's Free
This information is provided by ABC-Amega Inc. -- providing 1st and 3rd party commercial collection services since 1929, and collecting in more than 200 countries worldwide. For further information, contact firstname.lastname@example.org.