Pros and Cons of Outsourcing Debt Collection

Written By Ellise Walsh

Any person who runs their own business will eventually encounter the problem of debt collection. While most of your clients may pay on time and in full, you will inevitably encounter the customer who just refuses to pay his or her bills.

How you handle these bad debts is one of the most important decisions any business person will need to make. The business owner will need to decide whether to attempt their own debt collection or outsource it to a debt collection service. There are pros and cons to both approaches, and what is right for one business may not be right for someone else.

Whether to outsource your debt collection will depend in part on the staffing level of your business. If you have someone already on staff whose schedule allows it, you may be able to have him or her do your debt collection for you. Of course, you will need to make sure that the employee is skillful at making debt collection demands. Debt collection is somewhat of an art form, and not every employee may be up to the task.

Of course, if you do not already have staff available for debt collection, you may want to look into hiring a debt collection specialist. You will need to check your local market to determine a fair salary when hiring a debt collection specialist. You will want to make sure the salary is competitive so that you can attract the most qualified individuals.

Of course, the alternative to doing your own debt collection in house is to outsource that debt collection to a debt collection or debt recovery service. There are many such businesses around the country, and they typically work on commission. The debt collection service keeps a percentage of every dollar they recover for you.

Some debt collection and debt recovery services will simply buy your outstanding accounts receivables accounts for a percentage of the account�s value and then recover the funds on their own. Which of these options you choose will be a decision you will have to make based on the amount of money you are owed and what you think your chances of recovering it are.

One downside of outsourcing your debt collection is that you will not have control of your debt collection efforts. An outsourced debt collection service may affect how your company is perceived by customers.

No matter whether you outsource you debt collection efforts or do them in house, collecting your past due debts is definitely one of the least appealing aspects of running a business. It is, however, an important part of owning any business, and getting a handle on your accounts receivable is vital to keeping your company financially solvent.