Many businesses must walk the tightrope of sustaining their cash flow while keeping their customers happy. The evident aspect that can disrupt that balance is debt collection. Customers often don’t pay, and businesses must recover their outstanding payments. You have two paths to choose from: will you handle in-house collection processes or outsource collections to a debt collection agency? Most will choose the former to safeguard their reputation, but many would choose the latter to recover their delinquent accounts. What if there was a third option that did both and cost you less than you anticipated? Integrated resourcing: utilizing the services of a staffing agency to hire a debt collector who works on your collection dedicatedly.
Outsource Debt Collections – Why it Doesn’t Work
When a company wants to relieve some operational workload from its core team or has limited budgets to manage functions, it often hands over those duties to a third-party provider. Outsourcing is not a new concept, and it has also been prevalent in debt collection. One of the most common reasons businesses outsource debt collection is that they don’t have the resources or strategy to collect debt internally. Or they tried to handle collections internally and faced issues with collecting effectively.
However, there are other reasons why outsourcing debt collection can be tricky. The more significant issue is that collection agencies that take on your collections typically outsource the collection task further to independent debt collectors. The result is a lengthy chain of command and a Chinese whisper chain where debt resolution becomes convoluted and inefficient. Independent debt collectors need more training and often violate compliance with debt collection regulations, resulting in less ideal customer experience and low liquidation rates. Consider the Important Factors for Hiring the Right Debt Collector before outsourcing your collection processes.
Internal Collections – Not as Ideal as You Think
The flipside to outsourcing debt collection is handling collections internally as the creditor. Most companies realize the need for collection when their accounts receivable begin to mount up with unpaid invoices. The hassle of hiring debt collectors deviates from assembling a specialized team and assigning collection tasks to their in-house staff—often accounts receivable specialists or accountants, which has merits.
Read: Top 5 Benefits of Hiring Accounts Receivable Specialists
Internal collections seem safer, especially if your data remains within you. However, keeping control of your collections is not cut and dry and involves back and forth with customers. You will struggle to allow adequate time for effective collection, and your internal staff will burn out from juggling their core tasks with debt recovery efforts, especially if they don’t have specialized training.
Why Integrated Resource Staffing Works
Hiring debt collectors on your own is challenging, and outsourcing collections is risky – strike a balance with integrated resource staffing. Engage the services of a reputable staffing agency to gauge your collection needs and understand your industry requirements to find you the best debt collector. Integrating resource staffing is a step ahead of the other staffing models because it enables you to find high-performing talent from a wider pool without the hassle of onboarding and integration with your core team. Integrated resource staffing agencies can source trained debt collectors from offshore or nearshore locations and place them as your official employees within your organization. They work under your command, reducing compliance risks and overhead costs for HR, payroll, and benefits.
One of the most common challenges companies faces is the seasonal workload of collections. Your internal staff gets overwhelmed handling a growing list of unpaid invoices, and hiring third-party debt collectors is costly and risky to your client relationships. Integrated resourcing is a flexible staffing solution that can scale your workforce with dedicated debt collectors based on your collection volume without the stress of hiring and offboarding.
How Integrated Resource Staffing Improves Debt Collection
Outsourcing is one of the fastest growing markets in the world, especially in sectors that require highly skilled and trained professionals like IT and commerce. Debt collection, on the other hand, is a high-stakes business that turns the tide very often and very quickly. Only the most battle-trained experts can handle its nuances, and outsourcing talent for debt collection can endanger your profits and business integrity.
Liquidation Rate
The most important aspect of a successful business is effectively recovering revenue and maintaining a steady flow of payments to ensure a healthy bottom line. Debt collection can help safeguard a company’s assets and protect it from bad debt and insolvency. If you outsource your collections to a third party collection agency, there are higher risks of ineffective debt collection. Collection agencies or debt collectors hired by them usually handle debts that are older and harder to collect. The result is a lower recovery ratio, with agencies collecting only 20% of the total debt they are tasked to recover. This can lead to a higher chance of revenue loss, leading to liquidation.
High Contingency Fees
Companies with large debt volumes and mounting outstanding payments often struggle to handle collections internally due to limited resources and manpower. When these companies, often small or medium-sized businesses, engage a third-party debt collection agency, their eventual recovery is lower than anticipated because agencies charge contingency fees ranging from 25% to 50% of the collected amount.
Due to contingency payouts, the profit margin decreases considerably, leaving companies vulnerable to financial stresses and budgetary constraints. The more cost-effective solution is hiring debt collectors through an integrated resource staffing agency that can find you resources that can perform debt collector expertise and duties suited to your business to fast-track collections without commission payouts.
Consumer Experience – Collection Strategy
The only thing more important than recovering your outstanding payments is not alienating your customers while doing so. Most companies lose hard-earned customer relationships and future collaboration opportunities because of aggressive, unprofessional collection tactics. Third-party debt collection agencies deal with hundreds of clients at a time and cannot prioritize your customers over others.
The result is a soured customer experience; 80% of customers put in collections and facing ineffective collection strategies never return to your business. One of the highest complaint ratios to the FTC is from debt collection. In a CFPB survey, 29% of consumers reported being threatened by a debt collector in the past year.
Data Risks
Data security may be the most severe threat to any business, and any breach can cause significant financial losses. One of the reasons that creditors hesitate to engage debt collection agencies is to ensure their data remains in-house and secure. You must do your research before you hand over collection duties to agencies and confirm no risk of data loss or breach of sensitive information. Similarly, engaging contractual debt collectors is challenging because collection regulations don’t bind or follow them strictly. They need proper data security protocols to keep your data secure.
Integrated resource staffing allows pre-vetted and compliant debt collectors to conduct debt recovery. Utilizing their expertise, your chosen debt collector is systemically integrated with your in-house team and adheres to compliance and data security protocols to eliminate data breaches. The integrated staffing model allows you to control your data more and track its usage to ensure it is being used ethically and responsibly.
Experience Integrated Resource Staffing with Remote Scouts
The complications that arise from debt collection are not entirely because of the nature of the process; successful collections are heavily contingent on qualified debt collectors. Let Remote Scouts source your ideal debt collector with industry-specific skills and integrate into your team to enhance your collection processes.
Here is how we can transform your collections with the right talent:
- We are backed by 13 years of staffing experience, which we have distilled into tailored solutions to resolve your hiring needs.
- We leverage the experience of our parent company, Cedar Financial, a frontrunner in the collection business for the last 31 years. Our debt collector talent pool is specially trained by the Cedar University training program, which instills compliance, problem-solving, and a people-focused approach to handling debt recovery expertly.
- Our expertise spans onshore, offshore, and nearshore staffing, so we can hire a debt collector offshore or nearshore to reduce labor costs by 40%.
- As your Employer of Record, we go beyond hiring to provide integrated resource staffing services, such as HR functions, payroll, and compliance protocols, to manage your chosen candidate within your company.
- To address your data security concerns, we place your chosen debt collector in a secure offshore but on-site facility guided by SOC II Type II compliance certification to safeguard your sensitive data and conduct collections with complete professionalism and integrity.
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