Collection Agency

Posted by | January 9, 2014 | Home Business Ideas


Collection services assist businesses in collecting money owed to them by their customers while encouraging a continuing relationship. This usually entails mail and telephone correspondence as your primary tools for reaching delinquent customers. Home based collection services have a distinct advantage in serving small businesses, particularly health-care providers. Many large firms simply do not try to collect on smaller debts because it means less commission for the work. However, home based collection agencies that specialize in small debts are often the most successful.


To start your own service you will first need an understanding of the credit and collection side of business. Books on the subject will help, but practical experience in the credit and collection industry will give you an edge. You will need a “thick skin” and respect for you clients. Collecting money from people is regulated by both the Federal Fair Debt Collection Practices Act and state laws. State laws typically require people who do collections to be bonded and licensed, however, obtaining a license is usually not difficult.


Directly soliciting potential customers by mail or phone is the best method. The best type of businesses to market these services to are day care providers and agencies, health care clinics, small service based businesses, retail stores and other small establishments. It is also a good idea to have a brochure, business letter and other professional documents prepared.


You will need a personal computer, printer and software along with other general office equipment including a telephone, desk, chair, etc. You will also need business cards, a brochure and letterhead.


The majority of collection agencies do not get paid by the hour. Instead, they work on a commission basis, therefore if you do not collect, you do not get paid. Commissions range from 25 percent on young accounts to 50 percent on those that must go to court. For instance, a collection service that gets the debtor to pay a $1,000 medical bill will earn $250 to $500 depending the age of the bill and the agreement with the business. Typical annual gross revenues range from $30,000 to $60,000, based on a 25 percent commission for collections of $10,000 to $20,000 per month (the average for a small collection service)


Consider focusing your business on a specific industry. For instance health care collections, if you have experience in the field. Start with just one small account to gain experience and go from there!


American Collectors Association. Debt collection resource guide

The National Foundation for Consumer Credit. The NFCC network is comprised of 1,300 local non-profit organizations that provide consumer credit education to families and individuals.

Associated Credit Bureaus, Inc. International trade association, represents consumer credit and collection service companies.

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