You just negotiated to reduce your office supplies expense by an overall 7%. Great job, because we all need to cut back our expenses in order to thrive in today’s business environment. But you wouldn’t consider cutting back on cash that’s flowing into your organization. Yet that’s exactly what can happen when negotiating a low rate with your collection agency.
A low rate buys less work on your accounts. You want an agency to be able to afford to explore all avenues to collect your past due monies.
Consider how a collection agency performs or the net-back they return to you.
Imagine you just placed $1 million dollars with an agency with a 20% contingency fee (Agency “A”) over one that was charging 25% (Agency “B”).
Agency A collects 15% or $150,000; your net back (after a fee of 20%) is $120,000.
Now imagine you had placed those accounts with Agency B.
Agency B collects 20% or $200,000; your net back (after a fee of 25%) is $150,000.
That’s $30,000 more profit returned to your organization.
Quality doesn’t cost more; it returns more. Do the math for your business.