8 Steps to Hiring a Successful Collection Agency
Many companies can be easily weighed down by inefficient internal collection departments which draw valuable resources from traditional billing. Instead of continuing efforts to collect on old accounts, many companies choose to hire a reputable collection agency. This decision can substantially add to the bottom line.
Once the decision is made to hire a collection agency, it’s important to understand that not all agencies are equal. For example, some collection agencies specialize in certain industries. Others have more experience with large balances or small balances. While every collection agency basically works in the same manner, finding the right fit is the key to unlocking the value in old accounts.
Eight Important Steps to Hiring a Collection Agency
1. Huddle in Your Professionals
Most financial and legal professionals have experience working with collection agencies, so why not take advantage of the professionals that are committed to helping your businessalready? Huddle in your attorney, accountant, insurance broker or other business contacts and ask if they have dealt with a reputable collection agency.
2. Ask a Colleague
You are not alone. If you are having trouble collecting on unpaid debts, certainly others in your industry have too. Ask colleagues in your industry if they will share collection agency referrals, and ask about any issues that they have had with specific agencies. Their past experiences may very well prevent future headaches.
3. Agency All-stars
As in all disciplines, collection agencies build a reputation and circle of influence within different fields of commerce. For example, one hospital may have had great success working with a collection agency that specializes in Medicare patients, while you may have very little Medicare debt. Before deciding on an agency, ensure that they have experience (and success) collecting on the type of debts that you have.
4. Ask for References
Ask the agency for a list of existing and previous clients, specific to your industry, and call them! While most references will give an expected positive response, you may learn something that could make a difference in negotiating the rate of your returns.
5. State and National Licensing
Does the prospective collection agency have a license to collect in your state? If the agency is only licensed in Florida, they will only collect from debtors living in that state. Be sure to ask where the prospective agency can legally do business. This simple question can save your company time and money.
6. Due Diligence: Research and Test Your Agency
Before deciding on a collection agency, ask the principals if you can listen to some actual calls, speak with the collection agents, and review collection protocols. You may even ask about their phone, billing and database technologies.
Collection agencies work on a commission basis, and may ask for contingency or administrative fees. Do your homework first. Take time to review your accounts, and know how much you are willing to lose before discussing payment with prospective agencies. Once you know where your loss thresholds are, you are in a better position to discuss price. Fees may range from 10 percent for large, newer debts; or up to 50 percent or more for older, smaller debts.
8. Build a Great Relationship
The collection agency that you hire is an offshoot of your business. Maintain a good relationship with your agency, review their work regularly, and give the feedback to strengthen your business relationship and bottom line. Make sure that the agency you choose will represent your company in a way that you are comfortable.