You’ve exhausted multiple efforts to collect a debt owed by a client. You’re now at the point where you either write it off, or try litigation.
Because of the time and cost involved, litigation should be a last resort for debt collection. But you can also reduce your investment in litigation and thus increase your Return on Investment (ROI) in the process by using a collection agency.
A collection agency can save time on litigation
Before bringing a collection case to court, you’re advised to research the party from whom you’re attempting to collect to ensure you have a decent chance of securing repayment.
This is a time-consuming, but necessary part of litigation. Analyzing a debtor minimizes the risk of spending more on the litigation process than what you’re likely to collect from a judgment. It also reduces the chances of winning a judgment but collecting little to nothing because the debtor lacks the resources to repay the debt.
This research typically requires lengthy searches through public records and internet sites. You will have to research the financial strength of the both the business and its owner(s) and determine other obligations and judgments faced by all parties involved.
Instead of conducting this research on your own, you should consider using a commercial collection agency that has the research facilities and experience of evaluating many collection scenarios.
For example, some collection agencies use the debt collection process to learn about the debtors that its clients are trying to collect from. They do extensive research to learn as much as they can if collection isn’t possible without litigation. They also inform their clients what they think the expected likelihood of recovery is along with the information and analysis that lead them to this conclusion.
A collection agency can save money on litigation
While collection agencies are often used as an alternative to litigation, they can be a valuable resource if litigation becomes the only viable option.
If you attempt litigation through traditional means, you will likely have to hire an attorney on an hourly basis. You will incur that cost, in addition to court fees and other expenses, regardless of how much you collect from a judgment or even if you collect nothing at all.
Collection agencies, on the other hand, work on a contingency basis. This means you pay nothing if the agency does not collect. In addition, agencies often work with attorneys who will take collection cases on a contingency basis. So you can take your matter to court and benefit from an attorney’s assistance without hiring to pay on an hourly basis.
When litigation is the only alternative left to collecting a debt, the goal should be to maximize your return on investment of both time and money. A collection agency can help you achieve that objective.