Business

Collection Agency Business: How to Start

A collection agency is a company that pursues the debts of companies or individuals. Business owners and even individuals turn to collection agencies if they have trouble collecting payments from customers, especially when their accounts receivable are past due.

Debt collection is a profitable business: In the United States alone, the debt collection industry earned more than $12 billion dollars in 2012. The average salary for a debt collector is $28,500. The value of the collection agency business cannot be overstated and enterprising individuals may find it to their advantage on many levels.

However, the collection agency business is considered one of the least consumer-friendly industries in the United States due to the aggressive methods these companies often use to collect debts. If you plan to start your own collection agency business, you can avoid that stigma by following these guidelines:

1. Learn all the state and federal laws related to debt collection. Familiarize yourself with the law before starting your own collection agency business. Different states have different laws and policies regarding how you can legally deal with people who owe money.

2. Register your business. Before you can set up your business, consult with an accountant, business advisor, or attorney to help you process all the requirements. After that, register your business with the IRS.

3. Formulate your collections approach Your company’s collections process is an important consideration. Determine what fees you will impose on different types of debt and what methods you will use to communicate with debtors. Be sure to create your letter templates and call scripts ahead of time.

4. Set up your office and equipment. You can start small by renting an office space. If you are a small business owner, you can work from a home office. Get an Internet connection if you don’t already have one, and purchase necessary equipment such as computers, desks, chairs, and filing cabinets. Make sure your phone service can handle multiple incoming and outgoing calls simultaneously.

5. Create a marketing strategy. An effective marketing strategy makes it easy for potential customers to learn about your company’s services. You need business cards, flyers, and brochures to help you advertise your business. Take advantage of modern technology with social networks or your own website.

6. Start. Once all the preparations have been made, you can start running your collection agency business. Start by contacting potential clients: Once you have made an agreement with a client, you will be sent a list of debtors to contact.

Remember to be careful when dealing with debtors so as not to damage your client’s relationship with your clients. Remember, debt collection companies have a bad reputation with consumers; consider it your duty to break the stereotype.

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