How to Select the Best Collection Agency
What You Need to Know When Choosing a Collection Agency
Does it sometimes feel like you are running a bank rather than your business? Are your customers paying late, paying infrequently or not paying at all? If the cash flow of your operation is tied up by your clients, it’s time to seek help from a collection agency. A quick search reveals an abundance of agencies claiming to be in state or international, commercial or consumer, experienced or educated. Which factors should you look for when entrusting the financial health of your business to an outside agency?
Services Tailored to Your Unique Situation
Once you find an agency capable of operating in the state or country you need, determine which of their services will assist your business. These include, but are not limited to:
- Third-Party Services— Collecting funds owed to you for a percentage of what is recovered
- First-Party Services— Similar to third-party except they represent themselves as your company
- Legal Services— Assisting with claims that are disputed to the point of requiring an attorney
- Skip Tracing— Locating people and assets if they disappear while still owing a debt
Keep in mind that some agencies only accept business to business, or commercial claims, while others exclusively handle consumer. Typically, most of these services are offered on a contingent basis, meaning you only pay if the agency successfully collects. This can vary, however, depending on the service, quantity, or size of work.
Guarding Your Commitment
After matching your need with a service, make sure you are protected by checking the agency’s licensing and insurance information. Ask, or check their website for:
- States and countries where they are licensed to operate
- Industry certifications they have achieved or maintain
- Bonding or insurance data which ensures you are paid if something goes wrong
Don’t just take the word of the agency’s website however. Licensing requirements vary by state and country, and differ if it is a commercial or consumer matter. Make certain the agency is authorized for your job by researching at other sources.
Judging an Agency’s Experience
Next you might notice the agency pointing out when they were founded or how long they have been in business. Longevity does suggest consistency and adaptability, but does not equal experience on its own. An agency is only as capable as the collectors it employs, so ask:
- What is the average length of their employment?
- Are they certified or licensed?
- Do they participate in a continuing education program to stay up to date with best practices?
If an agency touts the experience of their employees as much as their organization, you can feel more confident in their performance.
Helping Beyond the Collection
A good collection agency uses its experience and services to fix your cash flow issues in the present. A truly outstanding one will also help you optimize your revenue cycle for the future. They do this through such services as:
- Offering credit reports so you can assess a prospective client before extending credit.
- Organizing credit groups amongst companies to help them make informed credit decisions.
- Training your business on effective debt recovery and credit management practices.
Plenty of agencies meet the requirement of resolving debt on a case by case basis. But if you want to prevent having debt problems in first place, identify an agency that will work with you to reach this goal.
More Than a Number
At this point, any agency with these qualities is likely an organization capable of performing your task to satisfaction. However the final characteristic defining a great agency is in the way you are treated. Collections is about numbers, but if you feel like one when speaking with an agency, you may not be in for the best service. Look for one that appreciates the trust it takes for you to give them input into the financial health of your organization. A great agency sees your business as a relationship, not just a contribution to their bottom line.
A collection agency can provide many valuable services and is a great partner to have when you find the right one. Hopefully the qualities outlined in this list lead you to an agency perfectly suited to the needs of your business.
By Ed Bessenbacher
Ed is a freelance writer and former collector based in Chicago, Il.
Email: ebessenbacher@gmail.com
