12.07.2021 | Posted by Erik
What’s the Difference Between an Outsourced AR Firm and a Collection Agency?
It’s no secret that traditional collection agencies use aggressive tactics to get debts paid. As a result, there’s a perception that the collection process has to be aggressive and threatening to be effective.
And frankly, that’s just not the case. As an outsource accounts receivable management firm, we’ve noticed that businesses that are behind on payments usually don’t want to be behind, but they avoid answering collection calls because they don’t like being threatened.
In fact, most business leaders that are past due are usually pretty open to working something out. Simply put, it doesn’t require aggression or harsh tactics to get caught up.
But because of this negative reputation, many businesses that could use some outsourced AR help avoid it because they’re afraid of how it might impact their customers. Well, it’s time to clear things up: collection agencies and outsourced AR firms are not the same.
They have some pretty fundamental differences. So let’s talk about them.
3 Major Differences Between an Outsourced AR Firm and a Collections Agency
Right off the bat, there are three main differences between an outsourced AR company and a collections agency:
- What They Handle: Outsourced AR firms handle everything, whereas collection agencies only work with the most challenging accounts. An outsourced AR firm works more like an extension of your company, whereas a collection agency is a third party and deals only with collections. A collection agency should be a last-ditch effort to get paid, while an AR firm is a first step to getting ahead on your accounts.
- Their Approach to Customer Relationships: Outsourced AR firms like Axim want all of your aging accounts so we can apply our customer service tactics to elevate your business’s image and help maintain your customer relationships. In contrast, a collection agency doesn’t care about preserving your relationship with your clients, and they definitely aren’t concerned with your company’s reputation.
- How They’re Paid: Outsourced AR firms are typically paid a flat monthly fee to manage all of your accounts, whereas collection agencies only get paid on what is collected and how old the debt is. As a result, collection agencies are laser-focused on collecting as much as possible – by any means necessary (hence the aggressive tactics).
These primary differences may be enough to make the decision clear for your company. But there are more complex disparities that are worth discussing.
A Comparison of Outsource Accounts Receivable Management Firms and Collection Agencies
Sure, we’re a little biased, but it’s for a good reason. Here at Axim, we really care about your customers, and we want them to stick around. We’ve had a lot of success in getting debts paid while maintaining your company’s reputation.
Our philosophy is that you get more bees with honey than vinegar, and in our experience with collecting debts, that’s been the case. The idea is to build rapport with people to get them to pay. We work with your customers to set up payment plans or agree to take partial payments to get them up to date. Our employees are customer service specialists, NOT debt collectors.
We would never yell at customers over money. Instead, we employ a customer service approach, which might take a bit longer, but doesn’t damage your image or burn any bridges. (We also find it to be much more effective).
The truth is that avoiding collections isn’t hard to do. It’s not that difficult to dodge calls and emails these days. In our experience, building rapport is the only way to foster mutual respect and also get the debt paid.
And to be perfectly honest, sometimes the friendly approach doesn’t work, in which case you’ll need to call in a traditional collection agency. But this should always be a last resort instead of a first option.
Choosing an Outsourced AR Partner
If you aren’t looking to bully your customers into payment, then an outsourced AR firm is the way to go. An outsource accounts receivable management firm can help get your accounts current before they become a bigger issue, and they can often achieve results at a lower expense.
At Axim, we’re dedicated to friendly and effective AR activities. And if we’ve worked an account that needs to be sent to a collection agency as a last resort, we’re partnered with some of the best in the business.
If an outsourced AR firm sounds right for you, contact us to see how we can help get your books in order with our friendly tactics and proven techniques.