Few businesses have an efficient collection process for payments from delinquent accounts, which is understandable because it’s unlikely they would be fully equipped with the necessary knowledge and tools.
Working with a third-party collection agency has several significant benefits, including the ability to improve cash flows by recovering more past-due accounts in less time and with fewer phone calls.
Third-Party Collections vs. In-House Collections
In a perfect world, all customers would pay their bills and invoices on time, all the time. As a Credit Professional, you know that the reality is much different. It’s not uncommon for customers to fall behind on invoices and to pay their bills late, if at all.
Late payments or nonpayment can significantly impact a business’s cash flow and potential profit. Your in-house AR Team can handle paying customers, but at some point, a third-party agency should be used to address slow and nonpayment situations that don’t align with your payment plan.
Partnering with a third-party collection agency to handle debt collections provides your business with the expertise of a third-party agency and frees your AR Team to focus on paying customers. A third-party agency can collect debts on your behalf to enhance your cash flow.
Outsourcing to a third-party collections agency can be the most cost-effective and efficient method for managing your delinquent AR.
Benefits of Third-Party Collections
Hiring a third-party collection agency can help your business collect on unpaid debts while saving you time and money. Take a look at some of the benefits of third-party collections.
1. Reduce Staffing Costs
It can be expensive to maintain an in-house collections department that remains compliant with the Fair Debt Collection Practices Act (FDCPA). In-house debt collection requires spending money on additional employees, ongoing training and certifications, skip tracing databases, analytics software, up-to-date technology, and more. For most businesses, it’s far more cost-effective to work with a third-party debt collection agency that is singularly focused on implementing their collection strategy.
While you manage your accounts receivable, a third-party debt collections agency can focus on unpaid debts. These agencies typically take a percentage of the overall recovered amount after a successful recovery, meaning you won’t need to pay upfront. This percentage paid to an agency is much less than all the costs of an internal team.
Third-party agencies can also scale more effectively as your business grows. Whether you enter new markets or take on more customers, an outside agency can maintain effective processes without impacting performance. You won’t need to pay for additional staff as your collections requirements grow.
2. Collect More Debts in Less Time
Hospitals and banks don’t train their employees to work on landscaping — they hire professionals with the tools and expertise to handle the job. Unfortunately, businesses in many industries fail to take this approach with their accounts receivable.
Third-party collections agencies already have their own tools, methods, and databases to help them identify the accounts most likely to respond with payment to collect more debt in less time, all while remaining in compliance with the FDCPA. Their methods enable you to accelerate the payment process, reducing unpaid debts.
External agencies can also use the data they’ve amassed to identify market trends that can help companies increase their cash flows. By hiring an outside agency, you free up more time to focus on core activities that have a measurable impact on your future.
3. Get More Effective Collection Strategies
Often, debtors take third-party debt collection agencies more seriously than in-house collections departments. Once an account goes to collections, it could lead to damaged credit or legal action. External agencies use innovative, fair debt collection strategies that have proven effective in various cases.
A third party accounts for details like debt type and age of debt to inform their strategies, which can lead to more successful debt recovery. Throughout the process, they maintain customer relationships while improving your cash flow.
Learn how to choose the right collection company.
4. Gain Access to Advanced Technology
Debt collection is the reason third-party collection agencies exist. It is their specialty. That means the third-party collection agency is likely to have the most advanced technology available to streamline the process and lead to more collections.
They may invest in technology like omnichannel communication, which allows them to communicate across various voice and digital channels. This technology offers greater convenience for customers, which can enhance the collection process. They may also offer flexible payment options, including payment plans and various payment methods. Personalization technology can enable collections agencies to enhance the customer experience to improve the collections process.
Other technology offerings include reporting. A third-party collections agency can gather information about businesses, allowing you to determine whether to work with them. Sometimes, the risk outweighs the potential reward, and it’s better to learn this before you offer products or services.
5. Receive Expert Advice
Few businesses have an efficient collection process for payments from delinquent accounts, which is understandable because it’s unlikely they would be fully equipped with the necessary knowledge and tools.
Working with a third-party collection agency has several significant benefits, including the ability to improve cash flows by recovering more past-due accounts in less time and phone calls.
Third-party collections agencies focus only on collections, meaning they know the best practices for getting clients to repay debts. They work with various balances and debt types at every stage of the recovery cycle. Their expertise covers multiple industries, so they know what will work for your business.
6. Gain Legal Support
Some collection issues are tougher than others and might require legal action. A full-service third-party collection agency can handle the litigation process for you. As your partner in debt collection, the third-party collection agency can help you determine when legal action is the best path to take. When you work with a third-party agency, you have legal protection if you need it.
7. Meet Compliance Guidelines
As with many financial matters, third-party collections require proper documentation to align with current laws and regulations, such as the Sarbanes-Oxley Act. Third-party agencies know these requirements and enact proper procedures to align with all regulations. They can maintain compliance even through disputes and challenges they may face throughout the collections process.
Your business may lack the resources or knowledge to maintain proper compliance throughout the debt collection process, but an agency knows all applicable requirements across multiple states and countries.
Another benefit of third-party collectors is that they carry proper licensing and bonding and hold certifications from respected groups. These signals demonstrate that you can trust them.
8. Achieve Proven Results
Expert third-party debt collection agencies pull from years of experience with multiple businesses across industries. Throughout their operation, they achieve results for their clients. When you work with a third-party collections agency, you can gain these proven results for your company. Rather than relying on your collections expertise, which may be limited, you can turn to an agency that has successfully recovered debts for many others.
Why You Can Trust Altus as Your Third-Party Collectors
Altus is the largest commercial collections firm in North America and consistently achieves the highest recovery rates for our clients. With decades of experience in the industry, we understand how to combine fundamentals like professionalism from licensed professionals with compliant, cutting-edge practices.
As the leading company in our sphere, we employ more than 200 collectors and prioritize communication. Often, working with a third party can feel like handing over the controls. With Altus, you can free internal staff to focus on core capabilities while staying informed about how collections and accounts receivable impact your business’s cash flow at all times.
When you partner with us, you take advantage of these benefits — our customer-focused collection automation system and passion for working with diverse companies in several sectors drive results.
Recover Global Debts With Altus
Companies that work internationally face additional difficulties in recovering payments from delinquent clients based abroad. Debt collection agencies have the experts, resources, and solutions needed to collect debts in both domestic and global markets.
Regardless of your industry, Altus can help your company maximize its collections recovery while strengthening and streamlining its cash flow management system. Over the past few decades, we’ve collected over a billion dollars for our clients.
Start a conversation with us today by calling 504-471-0948 or contacting us online.
