How to Find the Best Collection Agency – Best Practices
At times it is challenging to get customers to pay, but this is vital in any business. Possibly, you can hire a collection agency to perform the task for you. Though there are many smart ways to avoid bad debt collection process. After all, you are responsible for the growth of your business, and you have to deal with delinquent accounts, which can drain your resources and time. Notably, not every collection agency is created equal, and you have to look for the one that is best for your business. Collection agencies must be transparent on the reporting approaches, and they should help you maintain a good relationship with the customers. The following are tips for choosing the best collection partner:
Conduct a Research
There is a wide range of data collection agency, and every agency specializes in specific areas. For instance, some agencies focus on securing funds from large firms, while others specialize in small business entities. In this case, the implication is that before choosing an agency, consider the size of your business and the type of service you require. Find out the kind of debtor collection firm deal with what kind of business entity. Through this, you can find the best agency that can meet your needs.
The legitimacy of the Agency
Various states have distinct rules and restrictions for debt collection agencies. Ensure that the agency you need to hire is licensed, bonded, and follows the set rules and restrictions set by the Fair Debt Collection Practices Act. Through this, you can hire a legit agency for efficiency and formality. Hiring an unlicensed agency makes the collection process seem a fraud.
Enquire if the Collection Agency Applies Skip Tracing
Skip tracing aims at combating skip town. Through skip tracing, the agency can use and gain access to multiple databases that enable them to locate a debtor who does not leave the forwarding address. You could be contacting your debtor personally, and they ignore you. Through skip tracing, bad debtors can easily be traced. For effective debt collection, ensure that you hire an agency that uses skip tracing to reach debtors who do not leave their address.
It does not count how much you research about the agency, and there is a possibility that debt collection agencies use hostile tactics that can make the debtor feel that the agency acted in bad faith. On such occasions, the debtor can easily sue your agency. Whether you lose or win the case, you need to ensure that you are not held responsible for hiring the agency. Therefore, this calls for the need to get proof of insurance from the agency that in case the unlikely occurs and your debtor takes you and your agency to court. Such is referred to as errors and omissions insurance cover. This is held by legitimate debt collection agencies to offer protection.
Comparison of Contingency Costs and Fees
There a wide range of collection agencies that can work best with your business entity, you will need to compare their contingency costs and fees. Do not consider choosing a cheap collection agency, but instead find the quality of their services and then select the one that meets your needs. Debt collection has various payment structures, including:
Contingency- this payment structure involves a typical arrangement. Most collection agencies use the "No Collection-No Fee" approach, implying that in case they fail to obtain the debt from the debtor, you will not have to pay them. Further, some agencies charge around 25% to 45 % of the total amount to be collected.
Flat Fee- this is a straightforward cost that is associated with pre-collection fees. The fee charged is small, and it is paid before the actual collection process.
As a business person, you should always keep in mind that no matter what, when you hire a debt collector, you will not receive the full amount you are owed; hence it is better to try communicating with the debtor before hiring a debt collector. Handling debtors can be challenging as it can drain your resources. Hiring a debt collector could be the best way to deal with debtors instead of letting them go with your money hence bringing losses to your business.