What makes the best collection agency for your business? A great collection partner maximizes the amount of debt collected and returned to you, be transparent in their methods and reporting, and help maintain a positive relationship with your clients. With those goals in mind, here are 6 tips to selecting the right collection partner.
1) Consider total ROI, not just initial price
The collection percentage charged by an agency is just one factor to consider when deciding which partner to choose. While it may be tempting to compare agencies based solely on that percentage, what’s most important is how much cash they actually put back into your wallet. Many agencies charge a straight percentage of what they are able to collect, but the results they achieve on the number of accounts they actually collect on vary widely. A low agency percentage incentivizes work on easy to collect debt and may mean that other debt is ignored. In fact, a collection agency with a low fee rate and a low collection percentage won’t give as high a return as an agency with a higher fee rate and better recovery rate. To illustrate this, take a look at this example:
Even though Agency A charges a much lower fee rate, Agency B would still be a better choice because the cash return to the company is higher. When shopping for a collection agency, ask for an industry analysis to compare what type of results they have established for other companies in your industry. That knowledge can help you make a decision based on real returns and not perceived expense.
2) Insist on Customer Service
Gone are the days of menacing bill collectors threatening to break the knee caps of delinquent debtors. Top modern agencies focus on making it easier for clients to pay through multiple channels, payment plans, and early intervention. Look for a partner that can help you supplement your in-house process with payment notices early in the life cycle of a debt.
Part of outstanding customer service means ensuring that all calls are made from a domestic collection office. Outsourcing is common in the modern business world, but should not be used in the collection industry due to the sensitive nature of the relationship between your business and your clients. Domestic call centers pay dividends in both collection results and customer satisfaction. Avoid debtor complaints by partnering with a collection agency with a local or national presence.
3) Find partners, not collectors
Just like a marketing consultant works with a company to create better sales results, a collection agency partner should work with you to develop a system for managing your accounts receivable to increase your bottom line. Collection Agents are experts at debt recovery, and should work with you to improve your in-house collection efforts. For example, many collection agencies will help mitigate risk by conducting credit checks on potential customers, or help institute pre-collection measures that send out payment reminders at regular intervals.
4) Look at their track record
As with any purchasing decision, the best information comes from people who have used their services. Ask for referrals from organizations or individuals that would know best. Some good resources to turn to for information include:
Collection laws vary from industry to industry, so it makes sense to find an organization with experience in your specific field. They will often be better equipped to deal with that industry’s unique challenges and use that information to improve recovery while maintaining a compliance system.
5) Check for required Licensing
Under collection agency laws, agencies must be licensed to practice in the state in which they are located. For businesses that deal with in-state clients, a collection agency with a local license is more than satisfactory. If your business deals nationally, however, you will need a collection agency that’s licensed to practice in all areas where your customers live.
6) Evaluate Reporting
A common pitfall of many collection agencies is a failure to regularly report collection rates. You should expect at least a monthly statement and payment on any accounts, and access to an online portal where you can view recovery rates at any time.
The right collection company can do wonders for your cash flow. Completing a little bit of due diligence before making a final decision will ensure you have a partner that will get you the best results.