You’ve weighed your options and realize that without the help of a credit agency, you likely won’t retrieve the money owed to your business. So, where do you start? What should you be looking for in a collection agency?
When is it time to call in a collection agency?
Businesses are often hesitant to call a professional collections company. However, to increase your chances of collecting a debt and keep your revenue flowing in, you need to begin the collection process as soon as you see the following signs:
- When indebtedness is 90-120 days delinquent
- When inquiry discloses serious customer financial reverses, falling sales, or other creditor collection action
- When your costs don’t justify further investment of your time trying to collect on a debt
- When a customer demonstrates bad faith and loses credibility
Who do you call?
Understanding what to look for in a commercial collections company helps ensure that you are getting qualified help, you won’t be taken advantage of, and you get what you pay for. Here are some points to consider when doing your research:
- You get what you pay for. A prospective agency may be far cheaper but missing some credentials. That’s probably not coincidental. Make sure the agency is licensed in your debtor’s state and certified for providing the services you need. Check the Commercial Collection Agencies of America for a list of certified agencies.
- Does the agency have the right experience? It should be experienced in your industry and for the type and age of debt. It should be willing to provide reviewed or audited financials and to provide detailed information on its collections process.
- Is it easy to communicate with? The company should be able to provide you with a low-risk, clearly stated fee schedule; an accessible single point of contact; a reliable, simple method of transmitting files electronically; and a plain English agreement that explains all terms clearly, including how and when you will be paid. It should also provide you with regular reports on the company’s collections activity.
- Does it provide additional services that complement collections? For example, does it provide credit risk analysis or portfolio management to discover potential risk (and opportunity) for the future? Such complementary services can even reduce the necessity of starting the collections process.
You’ve chosen a collection agency — what’s next?
Provide as much information as possible about the debtor company. Accurate information about the account will improve the collections process and the likelihood you will be successful in recovering the money due. Be sure to include:
- Name, address, and telephone number of the business
- The industry it serves and what type of relationship you have with it
- Invoices, payments, and any other related communications with the client
- Summary of any disputes
- Date of last transaction
- Whether mail has been returned
Dealing with business customers who are behind on repaying their debt can be frustrating and time consuming. Typically, handing it off to a collection agency not only increases your chances of collecting debt but also frees up your staff to concentrate on other endeavors that help to grow your business.