For most of the companies that are in the lending business there are always these slow paying or non paying customers. It doesn’t matter whether the lender is large or small, this problem continues to exist. The balance sheet of such lenders is always affected when customers pay up late or don’t pay at all. Receivables that have aged considerably need to be collected and they can be best collected by commercial collection agencies. Outsourcing the collection job to a collection agency is always beneficial and improves the balance sheet at the end of the financial year. Most importantly, professional collection agencies are well aware of the rules and regulations related to this practice. Unethical collection practices by many lenders prompted the formation of the Fair Trade Practices Act and this act is continuously updated to keep the collection procedures fair and under control. For a lender it is not always possible to stay within the rules of the act but a professional collection agency will always collect as per the law. When you have debtors that don’t pay up your receivables can soon turn into bad debts. This means there are no collectibles for your business. This impacts your business in many ways. You find it difficult to show profits to the stakeholders; you have to keep planned investments in check and you may also find it difficult to pay your employees. Too many bad debts can even close down businesses and you certainly don’t want to be among them. When you hire a collection agency they are able to collect money from even your worst debtors and this can take care of all these issues mentioned above. Once you have a customer on board you don’t want to lose them. Even when a customer turns delinquent you can convert them into paying and loyal customers. Professional collection agencies can manage this for you. Anyone that is in any form of business is aware of the fact that retaining customers is much cheaper than acquiring new customers. So, when a non paying debtor it converted successfully you can rebuild brand loyalty. They will be with you in future and get converted into regular customers. Hiring a collection agency doesn’t mean expenditure only. Most of the collection agencies work on the commission model. This means that they only charge you a percentage of the money they are able to collect. This model works for them because they know they can collect from even the most hardcore delinquent customers. This also works perfectly well for your business because you don’t spend when you don’t receive. The best collection agencies are legal experts and they know how to work according to law to collect. When your collection agency sends out that first legal notice to your delinquent customers many of them pay up because of the fear of law. If someone tries force collection or unethical tactics they more often than not fail but this is not how a professional agency works.
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