Accounts Retrievable Systems - What A Collection Agency Does
A Collection Agency is a business that collects debts for a fee or percentage of the total amount owed on behalf of the original creditor.
While some collection agencies offer flat fee services, most operate on a contingency fee basis. The fee the collection agency charges is based on how old the debts are and how much business a creditor has to offer. The less amount of time the debt has been outstanding and the more outstanding accounts receivable a business has, the lower the percentage the collection agency will charge for collections.
The standard rate in the collections industry for business-to-business accounts is 30 percent. The rate for collecting consumer accounts is higher. The typical collection agency fee is in the 20 to 40% range.
This may seem like a lot, but collection agencies have experience with and knowledge about debt collection that individual business owners don’t have and hiring one can be well worth it if the amount of outstanding accounts receivable warrants it.
If you do hire a collection agency to collect your business’s debts, note that in Canada collection agencies are regulated by the province in which they operate. That doesn’t mean that you have to hire a local collections agency; just that you need to be sure that the collections agency you hire is fully licensed and bonded in your province.
From a consumer’s point of view, the fact that collection agencies are provincially regulated means that what a collection agency is allowed to do when pursuing collections also varies from province to province, although there are commonalities.
Article Source: www.about.com
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