Debunking A Common Collection Agency Misconception

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Within the arena of debt recovery, there exists a pervasive misconception that collection agencies are universally looking to partner with companies, regardless of whether the two partners would complement one another and be beneficially symbiotic. However, delving into the nuances of this industry reveals a more intricate landscape, where certain preconceptions can significantly impact the efficacy of the debt recovery process. Ultimately, quality collection agencies desire to partner with companies meeting a list of certain criteria.

The Impact of Account Volume on Debt Collection Success

One common misjudgment is the assumption that sending one or just a handful of accounts to a collection agency guarantees a swift and successful recovery. In reality, collection agencies thrive when dealing with companies exhibiting ongoing accounts receivable (AR). The rationale behind this preference lies in the need for consistent sample sizes, enabling the generation of predictable averages and returns. Consequently, businesses that submit only troublesome accounts face a daunting challenge in the collection process, particularly when the volume is inconsistent.

To contextualize this challenge, consider the average success rate for debt recovery in the United States, which hovers around 25%. For a company entrusting four accounts to a collection agency, statistically, the expectation would be a successful recovery on just one of them. This paltry success rate underscores the importance of volume in the collections business and the difficulties posed by a minimal number of accounts. Results also tend to be more unpredictable with smaller sample sizes, since smaller sample sizes lead to more unpredictable outcomes. Given this, our company, specializing in debt collection in Marin County, Sonoma County, and all throughout the Golden State, generally looks to partner with companies with consistent AR, to achieve our goals and satisfy clients.

Dispelling Misconceptions about Legal Recourse and Contingency Rates

Moreover, some prospective clients may harbor the misconception that utilizing collections is a gateway to a lower cost legal department or an attorney on retainer, especially when considering contingency rates compared to an attorney’s hourly rates or fees. However, it is crucial for those with one or two accounts to grasp that collection departments are dealing with a multitude of accounts concurrently and generally speaking any legal recourse would be considered usually only after the collections process has run its course. This underscores why many collection agencies operate on a contingency basis. At Tavelli Co., we emphasize a meticulous account scrutiny process early on, preventing wasted time for potential clients and ensuring that legal escalation is reserved for cases with strong merit and that meet specific criteria.

Despite these clarifications, hesitation often arises when clients are requested to send more than a couple of accounts. We often hear with businesses something akin to, “well I will send over more accounts when you collect on the few accounts we have already sent over.”  In a scenario where the average return rate is 25%, three out of every four accounts typically remain unrecovered. This volume-dependent nature underscores the necessity of a continuous flow of accounts for collection agencies to operate optimally. And while Tavelli Co. may outperform the national average, we are still performing in something analogous to a statistical probability game. Our goal is to optimize our staff talent and resources, along with unparalleled customer service and experience, to leverage these numbers into a favorable outcome.

Collections as a Vital Cleanup Tool in the Financial Ecosystem

Drawing a parallel between collections and the ecosystem of an aquarium, the role of a collection agency is akin to that of suckerfish. These agencies, armed with the best tools for tracking down delinquent accounts, allow businesses to spend less time and resources on locating critical demographic information, or focusing on the customer base already making on-time payments. Most people do not buy an aquarium to only put a suckerfish in it. Usually, this fish is an afterthought. In a similar vein, most companies start out by providing a service or good within a particular expertise or field. Most companies do not begin with the expectation that customers are going to be delinquent on paying. Therefore, collections is often an afterthought, and similar to the suckerfish, a very utilitarian and beneficial one at that. Tavelli Co. exists to clean up your financial ecosystem, however the utility of our job is partially going to be dependent on the focus of yours.

Having spent considerable time at Tavelli Co., I’ve gleaned that the most successful partnerships arise with clients who possess a comprehensive understanding of collection agencies’ operational dynamics. Despite the myriad of misconceptions surrounding debt recovery, collections, when approached with the right mindset and framework, emerge as one of the most underutilized yet powerful tools for successful debt recovery. By debunking these myths and embracing the volume-dependent nature of collections, businesses can unlock the true potential of partnering with a collection agency.

While exceptions exist, we’ve outlined the key criteria for identifying strong companies to partner with Tavelli Co. These include factors like continuous (or replenishing) accounts receivable, clear, and concise documentation (with applicable signatures), openness to feedback and improvement, a predominance of California-based debt, effective communication, timely payment reporting, and a reasonable average account age.

At Tavelli Co., our objective isn’t to reject prospects or potential clients. Rather, we aim for our company to mutually benefit others and contribute to our community. However, it’s not always feasible to partner with every inquiring company. Factors such as the age of delinquent accounts and other reasons listed previously may lead us to make the decision not to proceed in certain cases. Many of the calls we receive inquiring about partnering with us either come from an internet search or a word-of-mouth recommendation from current or past clients. We appreciate all our clients, and even the inquiries we receive from potential clients that we choose not to partner with. Ultimately our goal is to partner with groups who will end up content with our services, and then exceed their expectations. If someone calls in wanting to work with us, and their business does not meet the criteria we commonly look for, the given company may call back a year later when it does. Our goal is to honor your time and value your inquiry! To talk with our team, call us at (707) 509-5565 or request a quote.

Tavelli Co., Inc. has over 37 years of unparalleled experience in the debt collection and receivables management industry. Our mission is to achieve the right balance between getting clients paid and being empathetic to debtor circumstances, through implementing innovative practices, hiring experienced people, and improving business decisions through analytics. We provide peace of mind to all involved by collecting money with no complaints. Tavelli Co., Inc. takes the time to carefully listen to your customers and share their feedback with you through meaningful data and transparent communication, so you have access to the information you need to make quality decisions and improve your processes in the future. Contact us today and let the debt collection experts at Tavelli Co., Inc. help you set your business up for success.

IMPORTANT: Information provided by Tavelli Co., Inc., any employees of Tavelli Co., Inc., or its subsidiaries is not intended as legal advice and may not be used as legal advice. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.

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