What will I be doing?

Most people pay their bills on time. When they don’t, a collection service may be hired. 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.

Many of the people who operate successful collection services aren’t those with pristine credit. In fact, many are those who have had debt problems in the past and know how to help others get out of debt. They offer a useful service to both businesses and consumers, and get paid well for doing so.

What will I need to start?

To start your own collection service you’ll first need an understanding of the credit and collection side of business. Books on the subject will help, but practical experience in either or both sides of credit will give you an edge. You’ll need “thick skin,” self-respect and respect for your clients. You will also need a telephone and some office supplies.

You don’t have to be a lawyer, but you will have to learn about the laws of credit and collection. There are many books and pamphlets available on what you can and cannot do as a collection service.

Who will my customers be?

Businesses with overdue accounts receivable will need you to help them collect. In most cases, the business has already tried unsuccessfully to collect on the account. By the time you get the account, there may be bad feelings on both sides or the customer may have thought the bill was canceled. Your customers will be businesses, but without their customers—those who owe money—you won’t be paid.

Some collection services specialize in health care, child support, small business, retail credit or other areas. If you have special knowledge or experience in one of these areas, you may be able to collect bad debts where others can’t. This is a good selling point to your customers.

How much should I charge?

Most collection services don’t get paid by the hour. If they did, the range would be $30 to $60, depending on the type and size of debts and the success of the collector. If you don’t collect, you don’t get paid.

How much should you charge for your collection services? The typical range is 25 to 50 percent of the value of the debt. A collection service that gets the debtor to pay a $1,000 medical bill will earn $250 to $500 depending on the age of the bill and the agreement with the business. Most debts are for a few hundred dollars. Some collection services don’t use the telephone, but rely on legal-sounding letters to collect.

How much will I make?

Income from a collection service depends on your skills to find collectible debts and get them paid. So income can range from $0 to $1,000 a week. This is not a job for everyone; it requires a lot of tenacity to turn it into a profitable source of income. Within a few months you’ll learn whether this is a business you will enjoy and profit from.

How can I get started?

Consider starting your business with a single business account and a specific group of debts to test your skills and interests. Then expand as you wish. If you have credit and collection experience, your learning curve will be shorter and your profits will come faster than without this valuable experience.

Most important, remember that the service you provide is valuable to both your customers and theirs.

Contact the American Collectors’ Association (612-926-6547).

How can I use computers to increase profits?

Collectors can be more efficient by using computer software that tracks accounts, prints out collection letters, and manages other recordkeeping tasks. Software can also help you determine which collection methods work and which don’t. In addition, computers are useful for research on the Internet.