A collection agency does everything it can to get the bill paid. That starts with sending reminders and calling the defaulter. If that does not work out, then it is checked whether the invoice is suitable for calling in a bailiff and arranging a seizure. If the outstanding amount is too small, most companies will indicate that the costs do not outweigh the benefits and you will still be left with a bad debt.
Issues of collection agency
The major disadvantage of engaging a collection agency is the same as all other means of pressure to make a payment; it puts the relationship with your customer at risk. Consider how much this customer is still worth for your company and possibly consult with the collection agency as to how far they may go to increase the pressure. For the credit collection services commercial this is the best option now.
Then why do we need them?
A letter from a collection agency has a shock effect on many defaulterers. As a result, he still makes payment quickly. In addition, a collection agency can be solution-oriented. Certainly when you as an entrepreneur are now angry about the unpaid bill, you are often not open to the arguments of the defaulter. While they may be very plausible, a collection agency can then mediate, for example by proposing a payment arrangement.
What does it cost to use a collection agency?
The costs that a collection agency charges vary and consist of different cost items. In addition, both you and the defaulter often pay a part. So ask well with a quote if everything is included. What should you think about?
Collection costs: Average collection costs vary between 13 and 20 percent of the collected amount, with a minimum of 40 euros
File costs: Not all collection agencies ask for file costs, those who do ask on average between 25 and 45 euros
Advance costs: When the legal process is started (bailiffs and court case), some collection agencies request an advance. These costs are on average between 200 and 500 euros.
Other costs: Each agency also charges other costs. Consider, for example, reminders, downloading a Chamber of Commerce extract, GBA costs and administration costs.
Is a no cure no pay collection agency cheaper?
With a collection agency that works on the basis of no cure no pay, you only pay the agency if the defaulter has paid his bill. Certainly for small businesses and start-ups, that is nice, because you don’t incur unnecessary extra costs. Please note that this arrangement often only applies if the collection agency sends only a few reminders. As soon as bailiff and legal proceedings are initiated and the defaulter still does not pay, these costs will be recovered from your company if the defaulter never crosses the bridge.