Businesses work on a controlled debt strategy. However, if the debt gets out of hand, companies will find themselves on the receiving end of calls from a commercial debt collection agency. Phone calls can create an enormous amount of stress for many business owners. But, the reality is that working with them can be simply a matter of open communication.
This article primarily focuses on how communication without disrupting day-to-day operations is essential.
Functioning of commercial debt collection
Third party collection agencies are organizations that attempt to collect debt on behalf of other businesses. For example, a collection agency works exclusively with B2B creditors that need to collect past due payments from other companies.
There are a variety of tactics and tools to satisfy a delinquent account, including these common activities:
Certified demand letters
A formal demand letter is one of the first attempts a commercial debt collection agency will make to communicate with a business. The letter includes a statement of the balance, how much needs to be paid, and the due date for the payoff.
Negotiate payoff balances
In most cases, B2B creditors might authorize commercial debt collectors to make payment arrangements with their clients. This might be an installment plan or a discounted payoff when the balance is paid in full.
Routine phone calls
Demand letters are a formal process. Debt collectors can leverage when they have to sue for the balance owed. However, phone calls are the most common way commercial debt collection agencies use when trying to communicate with debtors.
Depending on the debt's nature and how communicative the debtor is, commercial debt collectors can employ other tactics, including investigating other debts and performing a skip trace on the owner to establish contact.
Most business owners believe the Fair Debt Collection Practices Act applies to commercial debt collectors. But moreover, the FDCPA was created to protect consumers and doesn't apply to businesses.
Pursuing payments
A third party collection agency will employ multiple tactics to elicit a response from businesses. For example, they might send letters every 30 days while also calling the business phone number several times throughout the business day.
Some collectors will contact business owners or finance managers via email. They may also resort to investigative tactics when they fail to establish contact. The agency must work with creditors to sue the business for the past balance.
How long can debt be pursued?
Your debt won't disappear. In fact, personal delinquencies get removed from credit reports after seven years. Also, here, there's no statute of limitations on debt, and collectors can attempt to collect the balance until it gets cleared or the company is out of business.
Buying debt from agencies
There are different approaches to how commercial debt collection agencies make money from their practices. The first method collection agencies use is purchasing packages of debt. The collection agency offers a fraction of the total value of the debt, but the creditor gets to write the debt off their book.
The other approach here for the agency is to pursue the delinquent business at no cost to the creditor. Then, when the debt collector receives payment, they keep a portion and remit the rest to the creditor, who can then write off the remaining balance.
Final Wrap
Business debt can spiral out of control for many reasons. The best approach to debt collectors is to avoid them; it can be hard to do when managing payroll and trying to boost services.
When debt gets turned to a commercial debt collection agency, establish communication and a plan for paying back the account in the future.
