Commercial Debt Collection

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Commercial Debt Collection

Using a commercial debt collection agency helps you to improve your cash flow by collecting bad debts. There are many reasons why a company passes an account over to a commercial debt collection service. It could be that the company has exhausted all its resources to collect the debt without having to go to court or it just doesn't have the manpower and time needed to concentrate on collecting the money owed. They may need someone to handle the case with better negotiation skills.

How can using Commercial Debt Collection Help Me?

Using commercial debt collection helps to ease the strain of trying to recover bad debts from a customer. It does help you save money in the long term. If you feel that this is an unrecoverable debt, you can sell the account to a collection agency and thus recoup some of the money. You can also pass the account over to an agency knowing that you don't have to pay any money until the agency collects on the debt. The fee is then a percentage of the amount it does collect.

When you pass an account over to a commercial debt collection service you have to provide the following information:

  • The postal and physical address of the customer
  • A record of a credit check you did on the customer when you first approved credit
  • Copies of statements and reminders that you sent out
  • Penalties imposed for late or missed payments
  • The due date for payment before you turn the account over to a collection agency

When you don't receive any payment or correspondence from the debtor, you don't have to inform him/her that you are turning over the account to a commercial debt collection agency. You have already done that when you gave a due date for the payment. You do, however, have to notify the debtor when you are sending a negative report to the credit bureau.

If you are not sure if your account qualifies for commercial debt collection, there are some pointers that can help you. If the debtor is disputing the account, saying that he/she does not owe this money, then you should probably wait until the dispute is resolved before starting any collection procedures. Other than that the norm is if a customer misses 4 months payments and does not respond to your statements, then you should place the account with a collection agency. Even for that length of time, you have wasted time and money from your company trying to recover the money.

What Methods Does a Commercial Debt Collection Agency Use?

A commercial debt collection agency uses different methods to help recover your money. Letters are mailed out and telephone calls made to the debtor in an attempt to get him/her to pay. These people are trained in dealing with rude people on the telephone - not that all debtors are rude - where your secretary may know these people and may not be able to handle the stressful situation. Some of the collection agencies also work with lawyers who know exactly what court procedures you have to follow.

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