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A collection agency is a commercial enterprise that collects unpaid invoices on behalf of its clients. It works as an extension of your own services. When your finance or business department fails to secure payment, you can seek help from a collection agency. You can use a collection agency for cases involving consumers (b2c), businesses (b2b) and public authorities. However, for consumers, the regulations are stricter.
When a customer, despite your repeated attempts, does not pay, you can involve various external partners. For example, you can summon him through a lawyer, put him on formal notice with a bailiff or entrust the case to a collection agency. This will try to reach an amicable solution, outside of justice.
Even if the international debt collection agency actually takes the same actions as the supplier, it usually performs better. This is mainly because of the psychological impact of third party intervention: we are always more impressed by someone we do not know and the same is true in the world of collection agencies. The most renowned are also associated with corporate information providers. This offers two additional advantages: On the one hand, these agencies know the financial situation of your debtor. This information is very important for the approach of your file.
On the other hand, debtors are more inclined to pay to avoid being mentioned in the database. The great advantage of working with a debt collection agency – especially in comparison to the summons procedure – is that you, the principal, can influence the working method. Whether you want a quick telephone contact, whether you prefer written reminders, a strict or commercial approach … you can determine the approach in consultation.
The employees of a collection agency are well trained and know how to deal with difficult debtors. They learn how to stay calm and convince the most recalcitrant bad payers to pay their bills.
For b2b cases, the collection agency can itself determine when to take certain actions. There are no legal procedures or rules set for this purpose. The collection agency can therefore do a lot of things very quickly and often settle the case very quickly. The situation is a little different for b2c folders. After the first letter, a reaction period of 15 days is foreseen. On average, a case is closed within two months, unless a clearance plan has been accepted.
To recover effectively, it takes discipline. Call every day and send reminders. Respond quickly. The collection agency is only profitable when it collects. Most of the turnover comes from commissions paid on the amounts collected. This gives you the guarantee that the collection agency will apply an effective approach.
Good relationship with the client
When you use a collection agency to collect your debts, you usually don’t want to destroy the relationship with the customer. Because the follow-up is carried out amicably and outside the courts, the commercial relationship is preserved.
A collection agency often works on the principle of ‘no cure no pay’. If the debtor does not pay, it costs nothing to the principal. In the event of recovery, a percentage agreed in advance is levied on the amount recovered. These collection costs can also be recovered from the debtor.
It makes no sense to forward a case to a collection agency when the debtor disputes. It would then only be one more part to intervene, which would make communication even more difficult. When a debtor disputes the invoice and clings to his point of view, it is better to bring in a lawyer. Legal summons is then the only solution.