First Party Collection: Why You Shouldn't Use Traditional Billing Services

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First Party Collection:
Why You Shouldn't Use Traditional Billing Services

Whether you're currently handling your own billing in house, or you're outsourcing your first party collection functions, here are additional reasons why you should consider using third party collection agencies that offer the service to also handle your first party billing. And why failing to do so may be costing your business more than you know.

Unnecessary Added Costs

Most standalone outsource billing companies charge setup fees and other up-front costs when starting their services. On the other hand, collection agencies often charge no setup fees, saving you a cash outlay expenditure at the beginning.

Standalone Billing Services vs Collection Agencies

Another very important distinction between third party collection agencies and standalone billing companies is the fact that billing companies cannot add the cost of collecting past due accounts. Let's face it: even though you may have hired a billing service to handle your first party collection and billing, some of those accounts will go unpaid and past due.

Unless you're handling your past due collections internally, your only other recourse to collect this unpaid bad debt is to hire a collections agency. Billing companies aren't equipped to collect your past due, delinquent accounts.

Billing companies are not collection agencies. In fact, most are really just glorified bulk mailing firms. Most billing services don't even make phone calls to your customers. After mailing a couple of statements, more often than not, they've pretty much exhausted their efforts. That's about as far as they go.There is a better, far more effective solution.

Recover Collection Costs To Your Business

By outsourcing to third party collection agencies, in some states you can legally recoup the costs of collecting those past due accounts, including interest. If your contracts clearly state that the customer will be charged for collection costs should the account go delinquent, then all costs associated with collecting the debt can be added to the original amount and charged to the customer. (Be sure to check your states' laws concerning this.)

Reporting Unpaid Accounts to Credit Bureaus

Outside collection agencies have the added advantage of being able to report unpaid accounts to the credit bureaus. This gives your delinquent customers a serious added incentive to pay their bills, since they may fear damaging their credit rating.

Standalone billing services don't report to the credit bureaus. As a business owner, this puts you at a great disadvantage. By the time your account goes through their billing process, those still nonpaying customers are free to apply for additional credit with other vendors. Several months may have passed before those accounts are finally reported to the credit bureaus, while those customers have already gotten new credit elsewhere.

After these accounts have gone unpaid for several months, those customers will almost never pay you, having gotten new credit elsewhere in the meantime, and before finally being reported to the credit bureaus. This makes the job of collection agencies even more difficult, and hard to collect after a business has used a billing service first, and the account has gone unpaid for several months.

Hiring a collection agency to also handle your first party collection and billing is a better solution, since all these duties will be handled seamlessly by a single entity: from first party billing all the way through to third party collections, for those necessary problem accounts that go seriously delinquent.

Your business will save the upfront costs and setup fees of traditional billing companies. And for those accounts that go delinquent, the collection agency can handle those pro-actively, efficiently and successfully.....and sooner!

If you would like additional information, or are interested in getting a first party collection quote, fill out the brief form below. One of our consultants will contact you shortly.

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