The need for a bad debt recovery agent arises, once all the in-house efforts of the company in recovering a bad debt become futile. Small companies are particularly vulnerable as they may not have alternate means of raising working capital to offset any delay in payment by a customer. They may not also have adequate resources to pursue and recover each and every bad debt. Collection or recovery agencies are organizations that specialize in recovering bad debts for a fee and have prior experience in doing the job. Recovery of bad debt is usually quicker with collection agencies. Other than recovering bad debts, they also provide many related services. This article discusses some of them. The collection agencies provide consultation services in order to formulate a sensible credit policy for a company. This policy would spell out procedures for ascertaining the credit worth of prospective customers before providing them with credit and the action to be taken in case of bad debts. In some cases of bad debt, the debtor may have disappeared from his/her usual location to avoid detection and recovery hinges on tracing the person which is called skip tracing. This service is provided by collection agencies. In case the recovery of a debt gets into legal dispute such as overdue interest, liquidated damages etc, the collection agency can provide legal assistance to solve the case in a court of law. Flow forwarding is a new concept in which the collection agency buys all bad debts from a company from time to time at a discounted rate. This can improve the cash flow with bad debts taken out of the books of the company and the company can show a healthier balance sheet. First time debtors are usually given additional leeway and time if they have a genuine reason. They may need to be educated about the consequences of not clearing a debt like blotting their credit rating etc. They also need to be explained alternate avenues of clearing a debt like bank loan, credit card etc. These steps are part of debtor reconciliation. This procedure would be required in the interest of the creditor company to avoid losing a valuable client. Collection agencies provide this service too. Lastly collector agencies would explore foreclosure alternatives with debtors in case of bad debt. This may include clearing the debt by making monthly payments, provide them alternate credit like soft loans etc. These are aimed at avoiding foreclosure that may lead to sell off of assets by mortgage lenders.
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