If your organization is burdened with negative cash flow, your ability to keep customers current in their financial obligations becomes mission critical. Approaches to achieving that and getting customers to pay you regularly differ.

Many organizations still rely on in-house debt collection teams as part of their accounts receivable program. While in theory, this may have moderate benefits, relying on internal resources for all your collection activity may ultimately be a negative. The obvious is the cost associated with maintaining those resources internally.

We always advise organizations to conduct proper due diligence with late-paying customers, including regular communication and procedures for following up on late payments. But at some point, those efforts can become ineffective.

If you run and maintain an in-house collections team, we’d like to explain why changing your debt collection strategy can be a game changer in many ways.

Staff salaries and training

Maintaining an in-house collections team means you’ll be burdened with internal staffing costs. Those costs include hiring and training as well as salaries and benefits. Depending on the size of your organization and the amount of receivables that become late, can determine just how much you may be spending annually to collect.

Additionally, the expertise required for effective debt collections does demand continuous staff training to stay current on evolving regulations and laws. If your business is expanding, you can expect the demand for collections to increase, which ultimately demands more staff.

Resources pulled away from core business activities

Every hour your team spends trying to collect overdue payments is simply an hour not spent on your core business activities. If you have a dedicated group of employees only handling collections, could those resources benefit your organization in other ways? In other words, could you spend your money more effectively? If you’re utilizing employees in multiple roles for your collections, that is taking time away from revenue-generating tasks and projects. It can also be a factor in employees feeling burned out because now they are wearing multiple hats and being pulled in many directions.

Potential legal costs of in-house collections

Keeping track of all the laws and regulations surrounding debt collections can be time-consuming. And if you’re doing business in multiple states or nationwide, there can be different laws in every state that your team will need to be aware of. Those laws can target times of day you can call a consumer, the legal amount of contacts within a given period of time, and other factors. Keeping up to date on debt collection laws can be complex and costly. While most laws are written for third-party collection agencies, breaking these laws with your internal team can invite litigation, which you’ll have to defend.

Outsourcing to a third-party collection agency is a cost effective solution

Streamlining operations around collections

By outsourcing your debt collections to a third-party agency, your organization can begin to streamline your operations and refocus those resources on core areas of your business. What could your organization achieve if you reallocated those resources to areas such as sales, marketing, new training programs and other areas? Working with the right reputable collection agency means that you’ll be partnering with an agency that is equipped with the expertise and the resources to navigate those intricacies of recovering debt. It means effective and efficient debt collections that will save you enormous amounts of resources.

Reducing costs for debt collections

We mentioned the possible dramatic savings in internal costs including salaries, benefits and other expenses associated with additional employees. But when you find a collection agency that offers a low-cost alternative to debt collections, the savings are even greater. And many times, extremely effective in recovering money owed to your organization. If you’ve decided to outsource your debt collections, find a collection agency that offers that low-cost option.

Improving the financial outlook of your organization

These “hidden” costs associated with your in-house debt collection program can significantly drain your company’s resources. And there is a far better, more profitable way to get your customers to pay those late invoices. Outsourcing debt collections accomplishes many things. It provides you with a cost-effective solution that will reduce your financial strain, allows you to reallocate resources for growing your business and it takes the complexities and sometimes stress involved with collecting money off your plate.

In short, hiring a third-party collection agency can be a strategic investment that will benefit the financial health of your organization for the long term.

Published On: March 11th, 2024Categories: Accounts Receivables, Advice for Businesses

Need to discuss your debt collection needs with APR?  Call (800) 711-0023 or use the form below to request more information.

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