Bicol University

College of Business, Economics, and Management

Sagpon, Daraga, Albay

Baluyo, Archie P.
BSBA Financial Management – IIIA
Credit and Collection

What do you think is the biggest advantage and disadvantage of hiring or partnering
with a collection agency? Support your answer with explanation.
Collection agency has a fair share of advantages and disadvantages. I believe
that the biggest advantage of hiring a collection agency is the efficiency it adds to the
operation of the business. It eliminates the need for creating internal collection
department which could cut administrative cost under operating expenses. The
company could then focus the human resource to strengthening application process
and customer service. For example, an employee working as associate credit officer
could just specialize on his/her tasks like evaluation of creditworthiness of clients to
hasten and sharpen his knowledge and experience on such tasks. That is if the
responsibility of collecting will be assign to a collection agency.
On the other side, a collection agency creates a gap in the relationship between
the client and the company. A gap that could weaken and worse break the relationship
with the clients. Having said that some collection agencies are not for a soft collection
transaction, meaning that the company cannot channel the values and principles they
uphold to their collection procedure. This will resonate on the image of the company
itself. I remember the documentation I had watched in YouTube about the
entrepreneurs in South Korea who loans to finance their businesses. Those who ended
up losing the business and went bankrupt before full payment of loan they were
harassed by people who collect payment for their loans which I believe were collection
agents. The harassments were way passed the line to the point that some fled and went
missing. I understand the ways of the collection agency in order to collect payments but
their ways will not do anything good to company. This will tarnish the image of the
company which might discourage other customers to avail their products or services.
At the end of the day, collection agencies are useful and essential for
businesses. Most especially to those in large scale operation. It just in the discretion of
the company in hiring or partnering with them. Partnering with collection agency might
be ideal inasmuch as they uphold the principle and values of the company and become
an agent of the company in sense. That would be my view in this matter.