Are you having trouble recovering debts from your customers? Or do you have some clients who’re refusing to pay your invoices? Well, it’s time you seek professional help.
With the help of a debt collection agency, it’s possible to recover debts that are past due. They reach out to your customers by phone, via email, or through writing. In extreme cases, the collection firm might even issue litigations against the debtor on your behalf. Dealing with delinquent accounts can really be frustrating, costly, and time-consuming. That’s why most business people choose to hire professional collection services.
However, not every collection agency is design to equally and not all of them will perfectly suit your business. Here are several aspects you should take into consideration when choosing a partner in the debt collection process.
Do the Research
Debt collection companies often specialize in certain areas. For instance, some thrive in securing funds from big companies whilst others excel in working with small businesses. So, do your research and determine the type of debtors the agency you’re considering commonly deals with as well as the type of businesses it popularly serves.
Read Online Reviews
Go online. Read reviews from that debt collection agency’s past customers. Go to online forums. Post questions there. With reviews, you can determine whether the agency is genuine or not. So, if you want to work with a genuine debt collection agency, consider reading reviews.
Referrals
You can also ask family for referrals. Ask your workmates for referrals. You can also ask your friends to refer you to a genuine agency. With referrals, you are sure of getting an agency that will offer professional services.
Verify the Agency’s Legitimacy
Different countries and states have different regulations for debt collection agencies. Ensure that the one wants to partner with is bonded, fully licensed, and compliant to the rules of your local Fair Debt Collection Practices Act (FDCPA).
“Skip Tracing”
Some debtors are now used to skipping town. To curb this practice, reliable collection agencies utilize what’s called “skip tracing”. This means that they’ve access to numerous databases that allow them to track a debtor who hasn’t left any forwarding address. This is particularly essential if you’ve been personally contacting the debtor and have been constantly ignored.
Insurance
Regardless of how much research you conduct, there’s always a great possibility that the debt collection agency utilizes aggressive tactics. In some cases, the debtor could complain that the agency didn’t act in good faith. And these could prompt them to sue your company. Whether you win the case or lose it all, you want to ensure that you won’t be held responsible for hiring the agency. Always make sure that you get full proof of insurance from the debt collector so as to remain on the safe side.
A good debt collection company holds what’s referred to as “Errors and Omissions Insurance” as protection for their business.
Fees
Once you’ve identified a few debt collection agencies that may work for your business, go ahead and evaluate their costs. Remember, the way different agencies charge might vary significantly, so be careful to choose the one that suits your budget. Most payment structures usually include the following charges:
- Flat Fee- This is a straight-forward cost that’s often associated with pre-collection fees. It’s small and is usually paid in the early stages of the debt collection process.
- Contingency: Most debtors utilize a No Collection-No Fee Model and often charge between 25 and 45 percent of the total amount of collection. However, this depends on your account details (like how old it is or how many contacts have successfully been made through it).
Remember, after hiring a debt collector, you won’t receive the full amount you’re owed. Therefore, it’s advisable that you exhaust all other options before choosing to hire one. But sometimes, dealing with debtors can be extremely frustrating and mentally taxing. Plus, it can drain resources. However, if you don’t have any other recourse, hiring a debt collector can be helpful.
When to Hire
Conduct rigorous product as well as service reviews to establish if the agency you’re considering is worth hiring or not. If your debtors move without issuing a forwarding address, it can be quite difficult collecting debt on delinquent accounts. And the longer your accounts stay delinquent, the lesser the chances of recovering your debt. In this case, a professional debt collector to help recover the funds on your behalf might be a cool option.
Debt collection agencies are often paid a given percentage of any outstanding money they recover on your accounts, but this doesn’t necessarily mean that they own the debt. After collecting a debt payment, they hand over the cash to you, but after deducting a certain percentage in fees.
Typically, a top-rated debt collection agency will provide services like formal demand letters, skip tracing, online portal access, phone calls/emails, as well as litigation.
Compare Different Agencies
When comparing debt collection companies, it’s always important to analyze their reputation. Don’t just look at the services offered. How an agency treats your debtor plays a significant role since they’ll be representing your business. Of course, there are stringent legislations surrounding any collection efforts. A reputable agency will observe those laws and treat your debtors with the respect they deserve.
So, consider evaluating the agency’s collection type (whether commercial or consumer) as well as the industries or locations they serve. Of course, not every agency will satisfactorily meet your business needs. But you’ll definitely find a firm that’ll help recover your debts successfully.
The Bottom-Line
By outsourcing your debt collection, you’ll be saving yourself adequate time for running other important credit department tasks. Plus, you can save your firm significant amounts of time and money. Since there’s an endless list of debt collection agencies to choose from, it’s always important to choose wisely. Follow the above tips and make the best choice today. From carrying research to asking for referrals—these tips are sure to give you the best agency.
