Congratulations! You’ve made the sale but still haven’t collected full payment from your customer. What do you do now? You can either track down those non-paying customers yourself or hire a debt collection agency. Debt collection agencies often provide flat fee or contingency services. Flat fee is self-explanatory. But what is contingency?
What is it & How Does it Work?
Merriam-Webster Dictionary defines contingent as “dependent on or conditioned by something else.” In the debt collection world this means ‘if we don’t collect, you don’t pay.’ It really is as simple as that.
There are 5 elements that comprise Contingency Debt Collections:
- Skip Tracing
- Legal Action
- Credit Reporting
- Asset Investigation
- Verbal Demands
When Should Businesses Use Contingency?
Studies have shown, the longer a debt goes unpaid, the harder it is to collect. Companies with debt older than 30 days typically implement contingency collections because these are classified as “tough accounts” and diplomatic means have proven to be ineffective.
Who is Best Suited for Contingency?
Contingency collections is effective for both consumer and commercial debt. Typically, though, companies that have “older debt” tend to use this method because these accounts are the hardest to collect and there are no out-of-pocket expenses required to get started.
How Much Does it Cost?
There is no standard fee for contingency debt collections because a number of factors come into play.
Let’s face it – whether you are the office manager, accounting manager or business owner your time is better spent on normal business operations. You don’t want to be making calls, sending emails or wasting money on postage to track down customers that refuse to pay their debt.
We encourage you to download our newest guide: Choosing a Contingency Debt Collection Agency, for an in-depth look at the process and how to choose the right collection strategy for your business.
The only remaining question is: how old are your past due accounts?