Debt collection agency versus hiring a lawyer for small businesses
If you have a debtor who’s behind schedule in paying, don’t be quick hire a lawyer or debt collector. Such action will appear too aggressive and may spoil the relationship you have. But in some cases, after taking several steps to recover your money – sending reminder emails, sending overdue payment letters, making phone calls – you can now move to the next level. You can either choose to hire a debt collector or a lawyer to take over. But how do you decide on whom to hire? Let’s look at the two professionals in detail.
Hiring debt collectors
As the name suggests, debt collectors focus on recovering unpaid debts. Their entire business is purely focused on offering such services and, as such, they have all the systems they need to perform the task efficiently.
Typically, debt collection companies approach recoveries using a similar approach to the one you used to follow up with the debtor. They use procedures such as sending reminder emails, dispatching overdue payment letters, making phone calls, payment restructuring, or even discounted debt.
Unlike you, the debt collection firms have a high success rate because (i) that’s their speciality (ii) debtors tend to take the stern communication from debt collectors more seriously because they can damage their debt history, along with other grave actions.
The advantage of using debt collectors lies in their competitive rates. If you want to want to save more when using debt collectors, you can choose an agency that provides a “No Recovery, No Charge” service. Debt collectors offering such a service are only paid once recoveries are made.
Hiring a lawyer who specialises in debt collection can be a wise decision, in some instances. However, it is a suitable course of action if you intend to take the debtor to court if there is no response from the demand letter issued. So, generally, it’s not worthwhile to hire a lawyer to chase a small debt.
The other advantage of hiring a lawyer is that debtors take threats of legal action much more seriously.
While both options are valid, hiring a debt collection agency is ideal for small businesses because it comes with the advantages of “No recovery, no fee service” and a proven track record.