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Hiring a Debt Collection Agency -v- Debt Collection Lawyer

Are you thinking about Hiring a Debt Collection Agency?  When it comes to recovering outstanding debts, there are two main options available:

  1. Hiring a debt collection agency to recover your debts; or
  2. Hiring a debt collection lawyer to recover your debts.

While both options can be effective, there are important differences between the two that you should be aware of before making a decision.

In this article, our debt collection agency will explore the key differences between hiring a debt collection agency and engaging debt collection lawyers, and help you determine which one is the best choice for your situation. 

Table of Contents

What is a Debt Collection Agency?

A debt collection agency is a company that specialises in recovering outstanding debts on behalf of creditors. Debt collection agencies typically operate on a contingency basis, meaning that they only receive payment if they are successful in recovering the debt. When hiring a debt collection agency, they use a variety of methods to recover outstanding debts, including phone calls, letters, and legal action.

Benefits of Hiring a Debt Collection Agency

There are several benefits to using a debt collection agency to recover outstanding debts, including:

  1. Cost-Effectiveness
  2. Specialised Expertise
  3. Resources

We will expand on these in a little more detail below.

Hiring a Debt Collection Agency is Cost-Effective

Debt collection agencies typically work on a contingency basis, meaning that you only pay them if they are successful in recovering the debt.

This is sometimes referred to as a no collection, no commission arrangement, or no win, no fee.

This can be a cost-effective option for small businesses or individuals who cannot afford the fees associated with hiring a debt collection lawyer.

Hiring a Debt Collection Agency has Specialised Expertise

Debt collection agencies have specialised expertise in debt collection and are well-versed in the laws and regulations surrounding debt collection.

This can be helpful when pursuing unpaid debts, as it ensures that all legal requirements are met and that your interests are protected.

Hiring a Debt Collection Agency for Better Resources

Debt collection agencies have access to a variety of resources and tools that can help them locate debtors and pursue unpaid debts.

This can include databases for finding debtors by conducting a skip trace, or by using and leveraging specialist debt collection software.

This can result in higher collection rates and a quicker recovery of outstanding debts.

The Role of a Debt Collection Agency in Recovering Outstanding Debt

Debt collection firms are critical in collecting unpaid debt from delinquent customers. Debt collectors specialise in debt collection on behalf of their clients, who might range from tiny enterprises to major multinationals.

Debt collection firms would often begin by sending collection letters and making phone calls to the debtor in an attempt to encourage them to settle their past-due bills.

If these early measures fail, the agency may pursue legal action or engage the assistance of third-party field agents to make a house call to the debtor's home.

What is a Debt Collection Lawyer?

A debt collection lawyer is a legal professional who specialises in assisting individuals and businesses with recovering outstanding debts.

Debt collection lawyers are well-versed in the laws and regulations surrounding debt collection, and are skilled in negotiating with debtors to reach a favourable outcome for their clients.

Debt collection lawyers can also initiate legal action against debtors, if necessary.

Benefits of Hiring a Debt Collection Lawyer

There are several benefits to hiring a debt collection lawyer to recover outstanding debts, including:

  1. Legal Expertise
  2. Effective Negotiation
  3. Increased Collections

We will expand on these in a little more detail below.

A Debt Collection Lawyer has Legal Expertise

Debt collection lawyers have a deep understanding of the legal processes and regulations surrounding debt collection.

This knowledge can be invaluable when pursuing unpaid debts, as it ensures that all legal requirements are met and that your interests are protected.

A Debt Collection Lawyer is Effective at Negotiation

Debt collection lawyers are skilled negotiators who can work with debtors to reach a mutually beneficial agreement.

This can help to expedite the debt recovery process and increase the chances of recovering the full amount owed.

A Debt Collection Lawyer can Increase Collections

By hiring a debt collection lawyer, you can significantly increase your chances of collecting outstanding debts.

Debt collection lawyers have the tools and resources needed to locate debtors and pursue unpaid debts, which can result in higher collection rates.

How a Debt Collection Lawyer Can Help You Recover Debt Legally

A debt collection lawyer can give critical legal experience and help when it comes to collecting overdue payments.

Debt collection lawyers focus on debt recovery and the enforcement of money orders, and have a thorough grasp of the legal frameworks and rules that govern debt collecting and enforcement procedures.

A debt collection lawyer may assist you in legally recovering debt by employing numerous legal techniques and tactics. For example, they can:

  1. sue the debtor; then
  2. secure a judgement; then
  3. enforce it by of insolvency or enforcement warrant.

A debt collection lawyer can also negotiate with the debtor on your behalf and develop repayment arrangements that are legally binding. By employing a debt collection lawyer, you can ensure that your debt recovery operations are carried out in a legal and efficient manner.

Advantages of Hiring a Debt Collection Agency

Using a debt collection firm might have both advantages and disadvantages when it comes to collecting overdue debt.

One of the primary benefits of utilising a professional debt collection firm to recover any outstanding bills is that they have industry-specific experience in debt collection, which can boost the debt's chances of being collected.

Furthermore, a debt collection agency has access to debt collection technology and resources, such as skip tracing, which can increase the efficiency of debt collection.

A debt collection agency's capacity to manage complicated legal processes, flexibility in addressing specific debt recovery demands, and cost-effectiveness in comparison to engaging a full-time collections staff are all advantages of hiring one.

Which One Should You Choose?

The choice between using a debt collection agency or hiring a debt collection lawyer ultimately depends on your specific situation.

If you have a small number of outstanding debts and cannot afford the fees associated with hiring a debt collection lawyer, a debt collection agency may be the best option for you.

However, if you have a larger number of outstanding debts or if legal action is necessary, a debt collection lawyer may be a better choice.

In general, if you are unsure of which option is the best for your situation, it may be helpful to consult with a debt collection lawyer.

A debt collection lawyer can provide you with advice and guidance on the best course of action to take in order to recover your outstanding debts.

Hiring a Debt Collection Agency -v- Debt Collection Lawyer

To summarise, collecting outstanding debts is an important component of corporate operations, and firms have numerous debt collection choices to choose, including employing a debt collection agency or a debt collection lawyer.

Debt collection companies have various advantages, such as specialised experience, sophisticated resources, and cost-effectiveness, but they also have significant negatives, such as potential reputational harm and the danger of legal culpability.

Debt collection lawyers, on the other hand, may give critical legal experience and support, assisting in the lawful recovery of debt and ensuring that debt recovery actions are done in a legally compliant way.

Regardless of the technique selected, it is critical to realise the importance of ethical and legal activities while recovering debts, as well as the possible consequences of such tactics for the company's overall profitability and reputation.

Businesses may make educated decisions that match with their aims and beliefs, while also successfully managing existing debts, with this understanding.

15 Benefits of Hiring a Debt Collection Agency

Are you looking for information on the benefits of hiring a debt collection agency?

Handling money and managing cash flow is critical for the success of any business, but some customers may fail to pay their debts or meet their obligations on time, which can have a detrimental impact on a company's cash flow.

In such scenarios, businesses can rely on a debt collection agency to collect overdue debts from customers Hiring a debt collection agency can be beneficial for businesses in Australia in several ways.

Benefits of Hiring a Debt Collection Agency

There are a number of benefits of hiring a debt collection agency in Australia to collect your aged debts and unpaid invoices.  These benefits include the following:

  1. A debt collection agency will invest more time and focus.
  2. Higher debt recovery success rates.
  3. A debt collection agency can conduct skip tracing.
  4. Increased debt recovery rates.
  5. It adds a sense of urgency to pay the debt.
  6. It maintains business relationship with customers.
  7. Most debt collectors work on a no collection no commission basis.
  8. The cost-effectiveness of a debt collection agency.
  9. The flexibility of a debt collection agency.
  10. They can provide additional add-on services.
  11. They have different debt recovery techniques and approaches.
  12. They will provide you with detailed paperwork & documentation.
  13. You get professional advice.
  14. You get the benefit of legal protection.
  15. You get top rate professionalism and expertise.

In this article, we will expand on these benefits in more detail.

No Collection No Commission

Benefits of hiring a debt collection agency - Benefit number 1

Don't allow a bad debt to cost your company more money than necessary in debt collection charges. A professional collection agent will only charge you once the debt has been collected. In law this is sometimes known as no win no fee, but in debt collection it is called no collection no commission. Lock-in contracts should be avoided since they can increase expenditures if the debts are ultimately unrecoverable.  However, most debt collection contracts will allow for commission after the debt is recovered. No collection no commission is perfect for debt collection because it means that you are not spending more money upfront chasing aged debts.

Professionalism and Expertise

Benefits of hiring a debt collection agency - Benefit number 2

Debt collection agencies have years of experience and expertise in dealing with customers who refuse to pay their debts. It is quite literally what we do every day. A debt collection agency will have trained and professional staff who are skilled in communication and negotiation, making them effective in handling difficult situations. Debt collection agencies use ethical and legal methods to collect overdue debts, ensuring that businesses avoid any legal complications that could arise from collecting debts themselves. This professionalism and expertise may also mean that you can maintain a business relationship with your customer after the debt has been collected.

You Get Professional Advice

Benefits of hiring a debt collection agency - Benefit number 3

Because debt collection companies specialise in credit management, they may provide helpful recommendations and professional assistance to help better your company's financial condition. A debt collection agency may offer anything from practical advice on how to get your company out of debt to smart cash flow plans. They may also direct you to tools and other resources that can help you evaluate prospective clients and identify possible slow payers. A debt collection agency may also have a relationship with a debt recovery lawyer who can provide some initial legal debt recovery advice.  At Advance Debt Collection we have a special relationship with Stonegate Legal, a litigation and debt recovery law firm.

Increased Debt Recovery Rates

Benefits of hiring a debt collection agency - Benefit number 4

Debt collection agencies have higher debt recovery rates than businesses themselves. Debt collection agencies have the necessary skills and expertise in debt recovery and debt collection, and they have developed effective methods to recover overdue debts from customers. A debt collection agency will also be more persistent in their efforts, ensuring that customers pay their debts, which ultimately benefits businesses that hire them. This is what we do day-in and day-out, and so we have developed a number of skills and methods that have proven to be effective.

Higher Debt Recovery Success Rates

Benefits of hiring a debt collection agency - Benefit number 5

A debt collection agency will have a lot of experience collecting missed payments and overdue invoices, so hiring one increases your chances of recovering aged debts. A collection agency's only concentration is on debt collection, but you, as a business owner, are primarily concerned with operating your company, with debt collection being just 1 small part of 100 things that a business owner has to do. Collection companies provide a greater risk to debtors, and a specialist debt collector understands the specific legal tactics for legally compelling debtors to pay, and refer to a debt recovery lawyer if required. A judgment or a credit default sitting on a debtor’s credit file can have a negative influence on a debtor's credit score for a number of years; thus, reasonable debtors usually work out payment arrangements to avoid credit damage.

Detailed Paperwork & Documentation

Benefits of hiring a debt collection agency - Benefit number 6

Debt collection firms often retain meticulous records of all interactions with debtors. These documents can come in handy if you decide to sue your debtors in court. With such detailed data, you will be able to demonstrate to the court that you made significant attempts to contact your customer and recover the debt. This extensive paperwork will also be useful if you wish to deduct bad debts from your taxes. You might use it to demonstrate that you tried your best to collect the money owed to you. Rule of thumb – always keep detailed documentation. You never know when you will need it.

Cost-Effectiveness

Benefits of hiring a debt collection agency - Benefit number 7

Debt collection agencies save businesses time and money by handling debt collection, which allows businesses to focus on their core competencies and making money. Debt collection agencies use efficient methods and technology to collect overdue debts, reducing the time it takes to collect debts, thereby increasing cash flow to the business. Debt collection agencies also charge a fee only if they successfully recover debts, making them a cost-effective option for businesses – no collection, no commission.

Maintains Business Relationship with Customers

Benefits of hiring a debt collection agency - Benefit number 8

A debt collection agency will try to maintain a positive business relationship with your customers, even when collecting overdue debts. This aged debt may be an anomaly and you may want to keep a business relationship with this particular client/customer. Debt collection firms function as intermediaries between businesses and their consumers, ensuring that the debt collection procedure does not harm the two sides' relationship. This approach helps businesses maintain customer loyalty and can even lead to repeat business.

Debt Recovery Techniques and Approaches

Benefits of hiring a debt collection agency - Benefit number 9

Another benefit of hiring third-party debt collectors is that they have access to a wide range of tools and procedures that can help with the recovery process. For example, if a customer discontinues all communication with your company—their phone is unplugged and they leave no forwarding address—debt collection agencies can assist you in locating that client through skip tracing. Moreover, a debt collection agency will have access to (and pay subscriptions for) public records databases, credit reporting devices, and other information that might assist you in finding a customer. This way, a debt collection agency can attempt to get current contact information and get closer to resolving the outstanding debt.

Legal Protection

Benefits of hiring a debt collection agency - Benefit number 10

Debt collection agencies are well-versed in debt collection laws and regulations, which protect businesses from any legal repercussions that could arise from debt collection. Debt collection agencies ensure that they use ethical and legal methods to collect overdue debts, which reduces the risk of businesses facing legal issues or lawsuits. A debt collection agency will also usually have a debt collection business relationship with a lawyer or law firm who they will refer matters that are good legal debt recovery files. This means that you may also be able to take the protection and advice of debt recovery lawyers. At Advance Debt Collection we have a unique partnership with Stonegate Legal.

Time and Focus

Benefits of hiring a debt collection agency - Benefit number 11

Unlike the average business owner, who must deal with several issues at once, debt collection firms simply have one primary goal: to recover your debts. This means they have the time, energy, and resources to devote entirely to contacting creditors and collecting payments owing to your organisation. Their complete concentration enables them to accomplish speedy results. A debt collection agency who charges on a commission only basis has a double incentive to get you paid quickly, that is if you get paid quickly, then they will get paid their commission quickly.  It is a symbiotic relationship which helps both parties.

It Adds a Sense of Urgency

Benefits of hiring a debt collection agency - Benefit number 12

Most individuals have a mental image of debt collection agencies. Although this reputation might be detrimental at times, it can also be advantageous. When they get phone calls or letters from professional debt collectors, people tend to sit up straighter and pay more attention. It serves as a forceful wake-up call to clients, demonstrating that you are serious about recovering money due to your company. It informs debtors that you are not ready to ignore or dismiss the outstanding invoice. Not just this invoice, but this has a knock-on effect for any future payments. The increased sense of urgency provided by debt collection businesses drives customers to act more swiftly in clearing their outstanding obligations.

Flexibility

Benefits of hiring a debt collection agency - Benefit number 13

When it comes to recovering outstanding payments, a professional debt collection agency recognises that every company has distinct requirements. This is why they provide a wide range of debt collection options and allow you to select the one that best matches your business strategy. Depending on your requirements, a debt collection agency can refer immediately to legal upon non-collection, provide payment plans and acknowledgement of debt, and everything in between. There are a number of different ways to approach debt collection. Further, when it comes to payment, some collection agencies chase debtors for a flat fee, while others charge a percentage of the amount recovered. The latter is perfect for small firms since it lets them to make the most of their collecting budget. Furthermore, if you want to sell bad debts and write them off as tax losses, you may locate third-party collection organisations to assist you. Using a reliable debt collection agency ensures that your past-due accounts will receive the attention they require for effective debt recovery.

Additional add-on Services

Benefits of hiring a debt collection agency - Benefit number 14

Some of the other services that respectable debt collection organisations frequently give include basic tracking techniques to locate debtors, SMS capabilities to extend communication lines, and a client portal for faster access to different files and data. For a pre-approved charge, debt collectors may additionally conduct field calls, repossessions, and customised document services. We use third-party agents in every State and Territory in Australia to conduct this field agent work. Yet, it goes without saying that all sensitive or private data should be handled with the utmost care and professionalism. Some debt collectors even provide credit consulting as well as credit due diligence, allowing you to evaluate your customers before they become debtors.

Skip Tracing

Benefits of hiring a debt collection agency - Benefit number 15

A debt collection company can also conduct skip tracing to find debtors who are bravely hiding from their financial responsibilities. Skip tracing is the next stage in the debt collection process when a debtor goes missing and refuses all attempts to locate them. This includes doing internet database searches, social media searches, and other investigating strategies to learn more about the person's location. Doing a skip trace helps to guarantee that persons accountable for their debts cannot dodge the penalties forever. As a result, it is an essential component of any effective debt collection plan. If you need to find a debtor who is escaping you, our experts can help you achieve your goal.

Key Takeaways

Handling effective debt collection is critical to the success of any business, yet consumers may fail to pay their obligations on time, affecting a company's cash flow. Hiring a debt collection agency can help businesses in Australia in several ways.

First, debt collection agencies have trained and professional staff who are skilled in communication and negotiation. They use ethical and legal methods to collect overdue debts, ensuring that businesses avoid any legal complications that could arise from collecting debts themselves.

Second, debt collection agencies have higher debt recovery rates than businesses themselves. They have the essential debt collection abilities and competence, and they are tenacious in their attempts to guarantee that consumers pay their obligations.

Even while collecting late payments, debt collection firms retain a positive business connection with consumers, functioning as mediators between businesses and their customers, ensuring that the debt collection procedure does not harm the relationship between the two sides. Contact our debt collectors today or submit your debt online now.

When Should You Hire a Debt Collection Agency?

When operating a business, establishing a relationship with a debt collection agency is important as they can take the hard work out of recovering bad debts for you that have accrued in the short or long term.

Rather then letting your invoices become weeks, months or even years overdue, having a process in place to refer overdue matters to a debt collection agency will help you stay on top of things rather than letting them get out of hand.

Unfortunately, a lot of people hear the words “debt collector” and they panic, they are often seen to be aggressive or intimidating when in fact they are just the next point of call in assisting you to find commercial solutions and results to your unpaid or overdue accounts.

This in turn will ensure your business maintains necessary cash flow to keep your business functioning and running effectively.

When is the Best Time to Hire?

A question often asked is “when should I hire a debt collection agency?” or “how far overdue does the debt have to be before it can be referred for collection?”

In short, its best not to let your invoices become too overdue to think about when to hire a debt collection agency, for example, if your invoice terms are 30 days, once they become 60 day terms, it’s a good time to refer for collection, particularly for small businesses when cash flow is key.

The more pro-active you are in chasing up overdue accounts, the more effective your recovery will be, and this will also avoid creditors from becoming further and further in debt with you.

If a creditor fails to comply with the terms of your invoice, and payment reminders and contacts go unanswered, the best step moving forward would be to refer to the matter to a debt collection agency to assist you in recovering your outstanding debt.

Appoint Early, not Late

Appointing a debt collection agency is easy and from a time perspective, its going to be a lot faster then having your staff chase up overdue accounts. 

The process with our team is simple, you can basically submit details of your debt online, which includes attaching documentation to support your debt. 

Once this information is received, we can open a file and get the ball rolling. Once you appoint a debt collection agency, services to recover your debt include issuing letters of demand, making telephone contact, negotiating suitable arrangements, settlement arrangements, status reports and the list goes on.

A letter of demand is an effective tool to encourage a creditor to deal with the matter. While you can send letters demanding payment yourself, they often go ignored until a letter is received on letterhead from a debt collection agency.

Benefits of Hiring Debt Collection Agency FAQs

Over the years we have been asked a number of questions about debt collection and questions specifically about a debt collection agency.  We have extracted a few of those below.

How long does it take for a debt collection agency to recover a debt?

The time it takes for a debt collection agency to recover a debt depends on various factors, including the size of the debt, the age of the debt, and the debtor's willingness to pay. In general, it takes anywhere from a few weeks to a few months to recover a debt.

Are debt collection agencies only for businesses?

No, debt collection agencies also work with individuals who are owed money by others.

Can businesses choose which debts to assign to a debt collection agency?

Yes, businesses can choose which debts to assign to a debt collection agency. They can assign all overdue debts or only select ones.

Do debt collection agencies have a success rate for debt recovery?

Yes, debt collection agencies have a success rate for debt recovery. The rate varies depending on the debt collection agency and the nature of the debt.

What fees do debt collection agencies charge?

Debt collection agencies typically charge a fee based on a percentage of the recovered debt amount on a no collect no commission basis.

Is it worth using a debt collection agency?

Yes, it is worth using a debt collection agency. There are a number of benefits to using a debt collection agency as outlined above in this article.

What are the benefits of using a collection agency?

There are lots of benefits for using a debt collection agency, including:

  1. No Collection No Commission – if they do not collect, you do not pay.
  2. Professionalism and Expertise – years (or decades) of professional debt collection experience.
  3. Increased Debt Recovery Rates – we do not get paid unless you do. This is a good incentive.

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