Every company, small, medium or big that is in the financial sector always has ‘receivable income’ in the form of dues owed by customers. If you look at an Annual Accounts Statement there is likely to be a column denoting ‘bad debts’ or pending dues. Some of these amounts may be recovered, some not at all, or through long-winding legal procedures that can stretch through many years. The international accounting firm Pricewaterhouse Coopers (PwC) estimated that in the mid 2000s, external collection agencies recovered debts to the tune of $30 billion annually. This is a whopping amount!
In such cases, companies may either deal with receivables through internal mechanisms or outsource the collection of such amounts owed, to external collection agencies. These are third-party commercial collection agencies contracted by the company to use the skills and resources that the agency has in recovering the amounts due. Such an agency is called a Debt Collection Agency. These agencies are governed by the regulations of the Fair Trade Debt Collection Practices Act and so they have the knowledge and the expertise of the do’s and don’ts associated with the collection of Debt Recovery Singapore.
There are many benefits accruing from using a Debt Collection Agency, among these are:
• The internal accounts department of a company is usually responsible for collecting amounts due to the company; however, ‘ageing receivables’ as long-standing debts are referred to require a lot of time, skill and dedicated effort which may require intensive training. Since delays can cost the company extensively, a third-party service or commercial collection agency is fine-tuned to handle this job exclusively and therefore able to recover money that might otherwise end up not being recovered at all.
• Sales teams in companies that are owed amounts by clients are sometimes not paid their commissions or incentives if monies are outstanding from customers. This forces sales people to spend a great deal of time working to recover the money rather than doing actual sales calls or sales generation for future revenues. This greatly impacts the revenues of a business.
• Acquiring new customers is an expensive task but retaining existing customers is a key factor in the success and longevity of every business. Playing the role of ‘bad cop’ in debt recovery from existing customers is not a function that most companies look forward to as it can have adverse impacts with them. Using a third-party service to send notices for debt recovery usually spurs the person or company owing the money to get into action without seriously affecting relationship with the company.
• In business to business circles, the unwritten policy is to prolong bill payments for as long as possible to allow better cash flows. In some cases, unless a collection agency intervenes to demand payment, checks or outstanding amounts are not released against invoices.
• By paying a collection agency or agent a fixed salary for collecting debts no matter what the amount owed, companies save a lot of money which otherwise would have been spent on paying salaries and additional time and effort in training them to collect dues effectively. Most companies only pay collection agencies when the money is recovered.
Especially, for companies in the financial sector such as banks, extending lines of credit to existing and new customers depends a great deal on keeping ‘ageing receivables’ to the minimum. Only by fuelling growth, can banks succeed in achieving their target deposits and revenues. Therefore by using a commercial collection agency, the bank can expect to recover amounts early, retain customer relationships and credit worthiness as well as ensure that their financial books keep a healthy status.
It could be argued that an internal credit control department provides the same service as a debt collection agency. However, a debt collection agency can often provide better results whilst being more cost effective. The effect of a third party debt recovery agency becoming involved should also not be underestimated. Often, a simple demand for payment from a third party agency can be the prompt a debtor requires to settle an unpaid account.
A debt collection agency can also provide additional services to the core business of debt recovery. For instance, a collection agency may also provide legal services, enquiry agents, process serving, company searches, credit reports & company formations in addition to debt collection services. An agency providing all of these services can therefore be a “one stop shop” for all your credit control requirements.
A debt recovery agency may also have its own in house legal department employing solicitors & legal clerks. Such firms provide a real alternative to the traditional option of employing a solicitor & often at a fraction of the cost. A debt recovery agency with an in house legal department often provides a much more professional service than a firm of solicitors, who may not be specialists in the debt recovery arena.
Debt collection agents often have a less than desirable image. However, in recent years much has been done to regulate the industry to ensure that an efficient & ethical service is provided at a reasonable price. Ensure that any debt recovery agency you consider engaging is regulated by the relevant governing bodies & holds the appropriate licences & accreditations.
When considering engaging a third party agency also make sure that you understand the fees & pricing structure. Avoid any collection agency that requires payment upfront or requires you to purchase credits or join any form of membership scheme. A reputable collection agency will have a clear & concise fee structure which will usually be a set commission on any monies recovered Debt Collection Services Singapore.
In today’s competitive business scenario, cash flow is one of the major determinants of the growth of a business. It is extremely important to ensure that debts are collected promptly. In case customers do not co-operate you don’t have any other option other than availing services of a debt recovery agency. But it is important to research and find a reputed agency. It is easy to be lured into the services of agencies online but careful research will lead you to a successful and efficient debt recovery agency.