This article relates to freelancers, small to medium size businesses, and professional service firms.
Today I want to talk about the main myth with regards to debt collection agency contingency (no fee if no recovery) rates, along with what we are doing to ensure value to our clients.
The myth: "Collection agencies typically charge 30-50% fee on recoveries"
Who perpetuates this myth, and why?
-Collection Attorneys. Collection attorneys help in spreading this myth in order to warm you up for their costly fee structure. Legal action will take up more of your time and resources than the more logical third party collection intervention. A solid pre-legal, collection attempt will, more often than not, increase your return. If the effort is unsuccessful, you pay nothing, and legal action is always available as a last ditch effort. In fact, having attempted an amicable pre-legal solution will strengthen your case if it must go there. Tapping into decades of experience, we'll be the first to point you in that direction if that's what it will take.
-The uninformed. This is to include authors and bloggers who are simply regurgitating dated untruths they got from other unreliable sources, in the name of content, which has watered down the little known reality of debt collections. The spreading of this misinformation is hurting your bottom line. The crucial and necessary profit maximization, through specialized A/R management and collections, is a highly misunderstood and underutilized business function for businesses of all sizes and industries.
To say this myth is an incorrect, dated, and an overly broad assumption, would be an understatement. The fact is your cost will largely be a direct reflection of how you have handled the invoices to date. If your waiting until your invoices are over a year old, then you may be in the neighborhood of 30%, for good reason. Already have judgements? Then they will be in the 40% range. Again, for good reason. 80% of judgements go unpaid and can require extensive expenses to attempt to recover. The majority of placements that need a collection intervention won't fall in those high fee categories. A proper collection strategy through a firm like ours will never leave you with less than you would have without us.
The main factors at play with our rates are in your hands. Most agencies base their rates on the amount of time and resources they will require to be cost effective for BOTH parties, obviously. The amount of time it will take us to turn your coal into diamonds is what decides your rates. Average age, average balance, and volume of accounts are the key factors that will decide your fee structure. Help us help you by getting us involved early and often.
-Having a specialist involved to ensure your cash flow management is structured appropriately throughout the entire cycle is a crucial first step.
-Knowing when, and why, to allow professional help to proactively address problem invoices as they pop up, will always ensure you have more than you would without their assistance.
-DRUM ROLL~~~~~ Rates for top notch collection assistance are primarily BELOW 30%, in many cases as low as 10%. If your agency can't show you why their rates make sense to your bottom line, call us, we can! If we can't, then we'll make some suggestions and point you in the right direction. If our relationship won't MAKE you money, we don't want to waste either of our time. Taking on clients for whom we won't be an asset would be completely counter productive for us.
How do we specifically ensure value for our clients?
-We are a highly experienced and specialized partner for the industries we serve.
-Our unique set up was built and customized to ensure you more time and money to invest in the business you're in.
-A full service, consultative approach, ensures that you capitalize on our knowledge and experience at every stage of the process.
-Our more cost effective rate structure, and low overhead, ensures our clients top quality service and results.
-While there are some bad collection agencies out there, Cambridge Receivable Solutions is the answer to changing economic times. We are providing innovation to the typical archaic recovery model.
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Contact the Author:
President & Principal Consultant
Cambridge Receivable Solutions, LLC
Toll Free: 1-888-908-3905 Ext.101
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