Increase Your Net Return From Collections

Increase Net Collections


Lower Your Cost of Collections by 80%

By creating Credit Policies and Financial Policies, you can pass on a majority of the cost of collections to your customers. They are the reason you are using a third party to collect the debt. They simply did not abide by their obligation to pay you. Each state has different laws and rules for collection fees that are added to accounts when placed for collections. I have found that if you include the following statement, there is no reason that the courts in any state will not grant you these addition costs as it is a legal and binding signed agreement. The statement is:


In the event your account becomes past due and is referred to an outside collection agency or attorney, you will be responsible for the collection costs at the rate of 33% of the balance due, along with reasonable attorney fees and court costs incurred by this office.

It is important to include the exact amount you are going to add on. If you put reasonable collection costs or fees, it is up to the judge or referee to determine what is reasonable. By stating the exact percentage that you will be adding on and having the customer sign the agreement, you are creating a binding contract that will hold up in court.

 We do not collect all of the collection fees, sometime we use it as a settlement tool to get your original balance collected quickly in one lump sum. This also increases your total recoveries in a shorter period of time. We do collect enough to reduce your out of pocket expenses by as much as 80%.

Here is a simple scenario:

If you place $100,000.00 per year for collections (generally 6 months past due).

The Agency collects around 35% of those accounts placed: $35,000.00

The Agency charges you 30% which is $10,500, you then net out $24,500.00

Use collection fees to reduce your costs and increase your collection rates

If you place $100,000.00 per year for collections now at 3 months past due.

We collect 50% of $133,000.00 which is $66,500.00

We charge 29% of what is collected $19,289.00, you then net out $47,215.00

By using these ideas and concepts you would increase your net return (PROFIT!) by an astounding 96%!

By including this simple statement, you can reduce your cost of collections and also place the accounts out sooner, which results in a higher recovery rate. The older the account, the more difficult it becomes to recover it. People’s lives change over a 3 to 9 month period. They move, get new jobs and sometimes just disappear and you are not able to make contact with them. That is why it is important to create collection policies that your internal operations use to evaluate your past due receivables. It is important to make contact with the customer for payment immediately after the account becomes past due and to follow up on any arrangements that are not kept. Your staff will have 60 to 90 days to try and get the customer to pay. If they are unsuccessful, you can place the account at 90 days past due and have a good chance that we will be able to collect it. By adding on the fee, it also creates an incentive for the customer to avoid the account going to collections. You can create a final letter and send a copy of the signed agreement that states that they will be responsible for the collection fees at the rate of 33%.

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