Collection Basics

Collection Basics

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No one enjoys phone calls or letters from a “Collection Agency”. If you owe on an unpaid bill, they are one of the last people you hope to hear from. However, if you are a business trying to collect money that is owed to you, a collection agency can become a valuable partner.

A  reputable collection agency can help you with many tasks:

  • collect on a business note or trade debt,
  • collect from a non-paying consumer,
  • recover money for a bad check,
  • collect on an old judgment.

There are many  collection agencies in the United States, so you need to look carefully for the right one. Please look through our site to find the types of services that you need and then contact us so that we can customize a collections program to your needs.

The Time Factor Is Critical

You should plan on how and when you will get paid even before you deliver products or services. Getting paid promptly is dependent on a clear understanding with your customers, and on prompt, accurate invoicing. If a customer becomes delinquent, prompt action is important. If you can’t collect right away, you should consider employing a collection agency such as SF Solutions.

We will immediately begin communicating with your debtors through letters and over the phone . If we are unable to connect with your debtor after several attempts, we may refer your case one of our collections attorneys. A call from a collections attorney will almost always produce favorable results, as most debtors fear law suits.

Understanding Collection Agency Rates

If you are a business owner trying to collect on past-due accounts, a reputable collection agency can often help. However, it would be wise to conduct a little research before selecting one. Collection agency rates vary, sometimes significantly.

In general, the longer a debt has remained past-due, the harder it is to collect it. Therefore, the fee you pay out to the debt collection agency will be higher.

Contingency Fees

Fees  vary depending on the size of the debt, how long it has been overdue, and whether it was previously assigned to another agency.

Many agencies charge as much as 50 percent for some debts . When deciding whether to refer a debt to an agency you need to consider the value of your time and energy if you try to collect yourself, as well as your likelihood of success.

Debt Collection 101

Collecting on debts requires planning out your actions in advance. You want to have a blueprint laid out in advance that tells you the next step for every possible response (or non-response) from your debtor. Failing to plan ahead is a major cause of writing off debt prematurely.

Once an account becomes past due, prompt action is require. Psychologically the longer a person goes without paying making a payment, the easier it becomes for them to justify their actions to themselves. Additionally failing to contact sends the message that your payments aren’t really important to you.

You don’t need to go it alone

In many industries the volume of accounts that are past-due can rapidly out-pace the ability of in-house accounts receivable to collect them. This is when a reputable outside collection company can help you. A debt collection company has systems set up to send the large volume of letters and to make the large volume of phone calls needed to solve the problem.

Through the use of high-tech computer systems,  collection agencies can trace people who have moved or changed their phone numbers. If these efforts don’t yield results, then a collections attorney can be assigned to the account. Usually an attorney can obtain favorable results as few debtor want to risk having a collections suit brought against them.

Debt Management and Your Business

Most business owners and managers would prefer never to make a collection phone call. Yet debt management  should always be a top priority. In cases where companies operate on low profit margins even a few delinquent accounts can make a huge difference in the financial viability of the company. A high profit margin business may still be very viable with a lot of uncollected accounts, but can easily lose thousands of dollars every year, if they don’t collect on their outstanding receivables.

If your own accounts receivable department doesn’t have the staff, hardware, or software to collect on your overdue accounts, then it is time to hire an outside agency.

Getting The Dollars Back In Your Company’s Accounts

Debt collection companies that work on commission will work hard to get your money back so that they can get paid. You will often be able to oversee their efforts by logging into their on-line web site.

A good agency will always keep you up to date regarding the status of the accounts you have sent them. When they have recovered money from your debtors, you should be notified promptly.

Selecting a Nationwide Collection Agency

If you are discouraged because you are constantly fighting with your customers to collect your payments, or if it looks like your in-house accounts receivable department is being swamped with too many late payers then it is probably time to look for a nationwide collection agency.

Make sure that the agency you select provides the following:

1)Credit reporting for all 50 states

2) Skip tracing (should be included in the basic commission rate)

3) Bonded and insured (for their protection and yours)

4) Free online access 24/7/365 to all of your accounts, including up to date contact and payment history for all accounts.

5) A No recovery- no fee model. You don’t pay unless and until  they collect.

6) Access to a nationwide network of Attorneys to take legal action on your behalf on higher balance accounts when other methods fail.

7) Provide you with reports on accounts that are closed (bankruptcies, deaths)

8) Easy to read Monthly Status Reports.

Winning the  Game

Many businesses lose thousands of dollars every year due to customers not paying their bills. Debt recovery  rates ultimately affects everyone, from business owners and shareholders to customer who may have to pay higher prices if too many receivables are written off.

Collection Time Line

A collection company will first attempt to collect through sending letters and phone calls, then they will refer the matter to an attorney who will either send a letter or phone the debtor. When that fails the agency will offer to file suit on the creditor’s behalf if the size of the debt warrants it. At SF Solutions we will always advise you of the cost of filing a suit and request your approval before we file it.

Asset Management

Asset management can be a confusing area both for small business owners and corporate executives. Deciding which areas to invest staff time and effort in is particularly challenging. However one course of action is almost always critical, and that is to improve your cash flow and balance sheet by managing your receivables collections efficiently.

Failing to manage the proper and prompt collection of the amounts you are owed will lead to weaker balance sheets and stunt your company’s growth.

In-House Accounts Receivable Management

An In-House Accounts Receivable Management Department’s primary task is to make sure that invoices and statements get out promptly and accurately. Many of them are not equipped to follow up properly on anything but a small number of overdue accounts.

In cases like this letters and phone calls to late paying and non-paying customers end up at the back of the work queue and the amount of past due receivables can rise rapidly.

Where to Turn

In cases like the above situation you need to  is to find an outside agency as quickly as possible. We at SF Solutions, LLC. would appreciate the chance to solve your debt collection problems. Please give us a call.


 Business to Business Collections

Business to business collections present an additional challenge: it may be critical to collect payments without ruining the business relationship, so that you are able to do business with that same firm again, later on. In cases like this, an outside collection agency can be a useful buffer.

Bank Account Searches

Whether a debtor is an individual or a corporation, sometimes they will claim that they are unable to pay.  In cases like this, it is often necessary to do a bank account search. This is a difficult task that most businesses are ill-equipped for, and is best left to a collection agency.

Things to Look for in a Commercial Collection Agency

There are many collection agencies out there who purport to be professional and reputable  . However, the realty is that agencies vary greatly in their degree of professionalism. Some can cause more problems than they solve.

One good idea way to see if the agency you are considering hiring is reputable is to see if they are a member of the Commercial Collection Agency Association (CCAA), a division of the Commercial Law League of America. Since 1972  this association has worked  to improve the professionalism and reputation of the commercial collection industry.

Membership in the ACA

Another positive sign is if an agency is a member of the ACA. Member agencies of the ACA are certified by the American Collection Agency of America, and must meet strict ethical and professional criteria. You can visit the ACA  website and browse their member directory to see if the agency you are considering is a member.

Judgment Enforcement

When people receive their first judgment they are often surprised is that all they get is a piece of paper saying they have won (but no money). When that happens you need a collection agency that knows how to collect your judgment for you.specifically deals with judgment enforcement and debt recovery.

A collection agency like SF Solutions will have high tech systems that allow them to find your debtor’s personal information. Locating assets is one of the most important steps in collecting on a judgment.

Steps to Collecting a Judgment

After a judgment enforcement agency finds bank accounts or other assets belonging to your debt they can attempt to attach the bank accounts or seize other assets. If the debtor is receiving wages or other income on a regular basis, they can garish them. These are all legal methods of collecting what is due you. Judgment enforcement agencies prefer to take these actions with out notifying the debtor in advance to prevent them from moving assets or changing employers in advance. In the case of business debtors judgment enforcement companies have additional options such as till taps, where a sheriff’s deputy accompanies them to a retail business and seizes income as it comes in.

What Are Your Options?

Once you have exhausted all you other options to collect, you may be forced to file suit for the amount that you are owed. Normally you will use a collection attorney to do  this. Most collection companies  can handle the arrangements for you. In most collection cases the plaintiff prevails, and you will receive a judgment. It will be your responsibility to collect on it.

Usually, this is not an easy task. A good collection and judgment recovery agency will be able locate your debtor’s assets to satisfy the judgment.  Alternatively they may be able to garnish the debtor’s income so that your judgment will gradually be paid off. Collecting on judgments is a tricky business as the rules are slightly different in every state, so it is best handled by professionals.

Debt Collection Agencies Are Not All the Same

All debt collection agencies are slightly different. Each agency offers its own set of services and has its own pricing structure. It’s your responsibility, as the one hiring the collection agency, to find the one that best meets your needs.

The Benefits of a National Collection Agency

Using a national collection agency has many advantages. A larger firm usually has the most up to date software to locate debtors, and to manage phone calls and letter campaigns. They will have contacts with attorneys in every state in case you are forced to sue, and they will have the software to locate your debtor and their assets if you need them to collect a judgment for you.


It is critical to find an agency that is able handle all your needs. Many agencies have only a one-size-fits all program. The right agency will present you with a choice of programs, and  help you pick those that best match your specific needs.

A thorough understanding of the collection process will help you get the most out of any collection agency that you choose. They should have a system in place to help you track their efforts in real time.