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Why use a collection agency and which businesses typically utilise their services?

By Andrew Kingstone - Updated on September 27, 2021

Whether it’s for one-off support on problem invoices or an ongoing credit control service, debt collection agencies are used by an increasing number of businesses in New Zealand.

There are numerous reasons why businesses may utilise an external provider when it comes to debt collection and credit control/credit management.

  • Regain time and resources to focus on newer invoices or core business
  • Peace of mind that aged balances are in safe hands
  • Services are typically provided on a success-only basis
  • Avoid having to write off unpaid invoices
  • Access collections expertise that often rivals and will eclipse in-house resources to bring results

Typically, businesses who choose to use a debt collection agency have experienced one or more of these problems:

  • In-house collections efforts have failed or are underperforming
  • Are significantly burdened with overdue debt
  • The customer that is uncontactable
  • Insufficient internal resources or expertise
  • The customer that is disputing the invoice
  • They are dealing with a particularly difficult customer
  • Repeated and ongoing excuses from customers

Regardless of your businesses shape and size, these problems are experienced by businesses, but some businesses experience these problems more often than others.

Let’s take a look at a number of business types that already benefit from the use of our credit management services. Maybe your business could benefit too?

New businesses (start-ups)

Working with a debt collection agency can be extremely beneficial for new companies.

When you start a new business, typically all the roles fall into one or a few people’s hands. This often means that the person responsible for credit control may not have the experience or expertise needed to get the right results.

Using a debt collection agency allows you to access expertise that will bring results and regain time and resources to focus on getting your business off the ground.

Plus, choosing to outsource rather than hire additional staff for the job provides the flexibility that’s required in the early stages of business.

Seasonal businesses

Companies that experience highly seasonal trading patterns can find it challenging to successfully manage their credit control throughout the year. This can make minimising and chasing late payments difficult.

Some companies may not have enough of a requirement to hire someone for the job in slower periods, whilst others might need additional support during busy periods to help their team cope with an increased workload.

For these businesses, using a debt collection agency can be beneficial as the flexible nature of outsourcing allows you to access support as and when you need it most.

Small businesses

Thousands of small businesses refer their overdue invoices to collection agencies every day because they recognise that chasing late payment is not their expertise and a third party is likely to have better results.

When you only have a small team it’s unlikely, you’ll have the time or resources to chase late payment without having to neglect key business tasks. However, by using a debt collection agency, you could free up time to concentrate on your business and still get paid.

Utility companies

Commercial utility companies such as energy, water and telecoms providers often work with debt collection agencies.

The complicated nature of customer relationships in this sector, coupled with complex regulation can make chasing payments challenging.

By working with a trusted debt collection partner utilities companies can save valuable time whilst ensuring that their reputation is always protected.

Construction companies

The construction industry is widely acknowledged as a sector with poor payment history.

The use of retentions combined with the multiple use of contractors and sub-contractors are just two reasons for significant payment delays.

Our debt collection agency has extensive expertise dealing with these challenges and will often excel at recovering your unpaid invoices.

Manufacturing companies

Manufacturing companies need a readily available source of supplies and materials in order to remain competitive and meet demand. Unfortunately, the cash flow challenges arising from trading on credit terms can make this difficult.

Therefore, waiting for payments to come in so that new orders can be fulfilled can be extremely frustrating.

Fortunately, debt collection agencies can help speed up the debt collection process, reducing the wait for payment and improving cash flow.

Fast-growth companies

Whilst growth is an exciting time for a company, it also presents some challenges when it comes to collecting payments from customers.

Your team may not have enough time, resources or expertise to cope with an increased volume of invoices each month.

Plus, a steady cash flow is needed to facilitate growth, so it’s vital that payments are coming in on time.

Professional services

Professional service providers such as architects, engineers, lawyers and financial advisors often place a big focus on client relationships.

Unfortunately, when trading on credit terms these relationships can be strained when forced to wait long periods for payment.

Not only is it time-consuming to chase the payments in-house, but there is also the danger of upsetting and potentially losing a valued client.

Working with a debt collection agency in these instances helps to maintain these customer relationships.

A good debt collection agency understands that maintaining your customer relationships is extremely important.

Printing and publishing

Most businesses experience some level of cash flow gaps between paying their suppliers and getting paid. But for printing and publishing companies, this problem is often magnified.

There are freelancers to pay, who may require payment according to different schedules, plus staff wages, equipment costs and various other overheads to account for all whilst waiting for payment according to clients’ schedules.

Therefore, waiting for payments to come in can be extremely frustrating and really damaging.

That’s why many printing and publishing businesses choose to partner with a debt collection agency.

A good debt collection agency understands that maintaining your customer relationships is extremely important.

These are just some examples of the types of clients we at Gravity Credit Management Limited represent, there are many more and it would be fair to say we represent a significant number of those businesses that you would encounter regularly.

That said we would very much like to have you on board with us. If you would like to discuss any aspect of the above or for a confidential no-obligation discussion, give me a call at 0800 GRAVITY or email me: [email protected]

Andrew Kingstone, Managing Director
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