Have you ever had a customer who refused to pay their bill? You provided the service or product to them, and they simply refused to reimburse you. Perhaps the customer has more priorities than paying their bill; maybe they don’t have enough money right now to pay an invoice; or maybe they just never planned on paying from the start. As a business owner, you need to decide what’s more important: getting paid for the service/product you provide, or having a business where customers don’t always have to pay. This article will provide the pros and cons of hiring a commercial collection agency for your business.

Pro: You’re Collecting Debt From Customers

The main reason for hiring a commercial collection agency is so you claim debt from customers. According to WebPT.com, third-party commercial collection agencies recovered approximately $44.6 billion in post-commission debt in 2010. Debt collecting can be a slow and time-consuming process when businesses try to do them with employees within the business (aka “in house”). This is why businesses can save significant time and money by hiring a commercial collection agency.

Pro: Less Heat for Your Employees

Trying to collect customer debt can put stress and a psychological strain on your therapists, billing staff, and other employees. If the business is a healthcare facility, a third-party agency can handle collection efforts and help direct a patient’s unhappiness away from the doctors or people at the business who would normally handle the phone call (WebPT.com).

Pro: Legal Protection

Some customers won’t hesitate to sue your business if they don’t want to pay a bill and/or think their rights are violated. Would you rather deal with these potential legal problems or hire a commercial collection agency, which is well versed in federal collection laws and the laws governing each state in which your business holds a license? The moment you hire a third-party agency for these collection efforts, your legal rights are protected and risks are eliminated (Chron.com).

Pro: Documentation In Case You Sue

If one of your customers has racked up a large debt to your healthcare facility (or other business), you might decide to sue them for that debt. Commercial collection agencies make records of all communication with debtors, which will be useful to you and your case, because it will demonstrate that you put forth extensive effort to recover the customer’s debt. (Chron.com)

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Con: It Can Be Expensive

Depending on the debt amount your business writes off each year, the cost of employing a commercial collection agency can range from 20–50% of the amount collected. Not only this, but some business owners recover less than 20% of what is owed to them when using third-party agencies. This is why it’s important to maintain a clear contract with a collection agency and to always enforce a patient payment policy. (WebPT.com)

Con: Hard Feelings with Customers

Some customers get a bad taste in their mouth if they receive a call from a collection agency about an unpaid medical bill. This is where your business’s value is tested the most: is it more important to get paid for your service, or to continue a relationship with a customer who may or may not pay their bill. Commercial collection agencies are required by federal law to follow respectful collection efforts, which can help your conscious when considering hiring a commercial collection agency. (FTC.gov)

Sources

WebPT.com: https://www.webpt.com/blog/post/the-pros-and-cons-of-hiring-a-collections-agency
Chron.com: http://smallbusiness.chron.com/advantages-collection-agency-65035.html
FTC.gov: https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text