To see if this would truly be cost effective, there are a few things you must consider. First is how many clients or customers you have in arrears on their accounts. Compare this to the total number of customers that you have. You can then compare the two numbers. If the percentage of those in arrears is high, you may need to hire a debt collector.
You should also keep track of how many hours you spend trying to get money owed. Many people, especially those who are salaried, do not keep track of hours. However, it is important that you do. These hours add up quickly, and is not time well spent. Think of all the things you could be doing if you outsourced that work.
Once you have an idea of how many hours you spend, calculate that times your salary for those hours, or the salary of the person you put in charge of collections. You may be quite surprised at how much you spend. It may be much more than an agency would cost you.
Another thing to keep in mind is that these customers may be behind in paying you, but that does not mean they are not valued. They might be friends or people you want to be customers again after they pay. Debt collectors can make the calls on your behalf without jeopardizing your relationship with them, and without the awkwardness that might come from asking someone you know and have a relationship with to pay up.
You should also consider the toll it takes on your lifestyle. There is a lot of stress involved in debt collection, which can negatively alter other parts of your life. If you do not manage to collect, then there is also the worry about getting behind in your own payments, since your income suffers when you have outstanding customer debts. All of these reasons and more are why it is a good idea to outsource the collection of your debt.