Having a commercial debt collection agency to handle collection efforts is a huge advantage that small businesses around the country would love to have working for them.
However, most of those same small businesses don’t bother picking up the phone to arrange such a partnership because they have already led themselves to believe that it isn’t financially possible.
Those companies don’t realize that hiring a debt collection agency can actually cost the company less than attempting to handle collections on their own. Let’s get into the details and figure out how much it really costs to collect a debt.
Contingency Fee Debt Collection
Most of the best commercial debt collection agencies work on a contingency fee basis. That means that their only fee to the companies they partner with is a percentage of the amount they can collect for their clients.
Because you are paying the debt collection agency out of the funds they collect, there are absolutely no out-of-pocket costs to the company that hires the agency unless that agency comes through and delivers results.
Factors That Influence Contingency Fees
When negotiating how much of a percentage those contingency fees will end up being, the commercial debt collection agency you are working with will want to consider the average age of the accounts you are attempting to collect and the average balance on those accounts.
The total number of delinquent accounts your company has on the books and the type of industry you operate in can also impact the odds of success, which inevitably works its way into the rate that you are going to end up paying for your contingency fees.
Total Fee Can Be Anywhere From…
Depending on the four critical factors listed above, the average contingency fee from a commercial debt collection agency could end up being anywhere from 20-50%.
Flat Fee Collections Also Exist
Some commercial debt collection agencies will work for a flat fee, regardless of whether they are able to actually collect for you or not. In most cases, these flat fees tend to fall somewhere around $15-20 for each account in collections, and the agencies willing to work at these rates don’t necessarily put in maximum effort to settle your accounts.
Just as with anything in life, you get what you pay for when it comes to commercial debt collection rates. If you choose to go with a flat fee or shop for a discounted contingency fee, you will likely get a subpar effort.
On the flip side, if you are willing to pay for the best in this industry, you will find that you also get the best results.
When it comes to collections, being able to actually collect the money owed to you should always be the top priority, regardless of the price you have to pay to get that job done right. Keeping 100% of a collection to yourself is worthless if nothing gets collected, and sharing 50% of the collection can be extremely lucrative if the alternative is nothing.
Contact us today and let Direct Recovery make a plan to put your collections on the right track!
