A collection agency is a company that goes after debts owed by businesses or private individuals. Business owners and even private individuals turn to collection agencies if they are having a trouble collecting payments from customers, especially when their accounts receivable are past due.
Debt collection is a profitable business: in the United States alone, the debt collection industry earned over $12 billion dollars in 2012.The average salary of a debt collector is $28,500.The value of the collection agency business can’t be overstated, and enterprising individuals may find it suits them on many levels.
However, the collection agency business is considered one of the least consumer-friendly industries in America due to the aggressive methods that such companies often use to collect debts. If you plan to start your own collection agency business, you can avoid that stigma by following these guidelines:
1. Learn all state and federal laws concerning debt collection. Familiarize yourself with the law before you start your own collection agency business. Different states have different laws and policies regarding how you can legally deal with people who owe money.
2. Register your business. Before you can establish your company, consult with an accountant, business advisor, or an attorney to help you process all the requirements. After that, register your business with the IRS.
3. Formulate your collection approach.Your company’s collection process is an important consideration. Determine what fees you will impose on different kinds of debts and what methods you will use to contact debtors. Be sure to create your letter templates and call scripts in advance.
4. Setup your office and equipment. You can start small by renting an office space. If you’re a small business owner, you can work from a home office. Get an Internet connection if you don’t have one already, and buy necessary equipment such as computers, desks, chairs, and file cabinets. Make sure that your phone service can handle multiple incoming and outgoing calls simultaneously.
5. Strategize your marketing. An effective marketing strategy makes it easier for potential clients to learn about your company’s services. You need business cards, flyers, and brochures to help you advertise your company. Take advantage of modern technology with social media or your own website.
6. Get started. Once all the preparations are taken care of, you can begin running your collection agency business. Start off by contacting potential clients: once you’ve made an agreement with a client, you will be sent a list of debtors to contact.
Remember to be careful when dealing with debtors so that you don’t harm your client’s relationship with its customers. Remember, debt collection firms have a bad reputation among consumers – consider it your duty to break the stereotype.