Hiring a commercial debt collection agency is an unavoidable process for many businesses if they are owed a large amount of money. It not only frees them from the trouble of collecting money from their delinquent debtors but also allows them to focus on other things that are more important to their business. To choose the best commercial collection agency, you should know what a commercial collection agency is, how the debt collection business works, and what could be the fee you have to pay for that.
Commercial collection agencies, also called business to business (B2B) debt collection services, are agencies specialize in recovering debts owed by one business to another. You may note that commercial collection agencies are different from consumer collection agencies which pursue individual consumer debts owed to businesses.
Choosing a commercial debt collection agency generally involves the following steps:
Assess the need of hiring a collection agency
Hiring an agency for collecting debts is a vital part of the business if you are owed a large amount of money. Generally, you can consider hiring a debt collection agency: when new customers, with whom you don’t have any business history, owe you money; or when customers fail to follow through their formerly agreed payment plans.
Decide the type of collection agency you need
As mentioned earlier, collection agencies can be broadly divided into two types: commercial collection agencies and consumer collection agencies. Additionally, there are some agencies that can effectively deal with both businesses and individual consumers.
If your clients are primarily of one type, it is better to choose a specialized agency. If you have to collect from both businesses and individual consumers, you may consider hiring two individual collection agencies or an agency that is capable to deal with both.
Find the age and average size of the debts to be collected
The age of the debts to be collected is an important factor you have to consider because collecting a debt which is 120 to 180 days old is entirely different from collecting a recently delinquent debt. The average age of the overdue accounts can be used later to find an agency specializing in that particular age of debt.
Large companies with a significantly large number of debts will have to work with a large collection agency while small businesses generally need small agencies. In general, smaller collection agencies handle nearly 100 claims annually for amounts less than $1000. You can consider hiring a large collection agency if your claims are for amounts over $25000 or if you have more than 1000 annual claims.
Find the right collection agency
Finding the right debt collection agency generally includes the following steps:
Ask the services offered by the company: Once you’ve located a potential debt collection agency, learn about the specific services offered by them. As the services offered by different companies are not the same, one can be more suitable for you than others.
Understand the focus of the collection agency: The areas of expertise and focus are not the same for all commercial collection agencies. Make a research to know more regarding the focuses of the agency and determine if they suit your needs. For example, if your business belongs to the medical industry, choose a debt collection agency that has good experience in recovering debts in that particular industry.
Find a collection agency with the capabilities you need: The capabilities of different agencies vary based on their professional direction, size, location and history. Make a study about how a commercial collection agency can help you before hiring them. It is always better to choose an agency that has the same size of your business. Make sure that the agency is capable enough to deal with the amount of claims you have.
Select a commercial collection agency with a fair approach to collections: The agency’s approach to collections is very important. They should be stern as well as polite. Some agencies may use the tactics of intimidation and fear for achieving their collection goals. As the collection agency can be considered as an extension or indirect part of your own business, the way they interact with the customers is very important for you. If the agency is not able to handle the clients appropriately, it may end up losing good customers who are struggling due to temporary issues and could even subject you to additional liabilities.
Check the Qualifications of the Agency: It is always good if agencies engaged in commercial debt collections have a license to do their work. It is important to note that such a license is not mandatory in all states. So, only hire an agency which is licensed to collect third party debt from debtors.
Check the credentials: Before hiring a debt collection agency, see their credentials as well. Make sure that the agency you hire is insured, bonded, and has membership in trade associations like ACA.
Know about the agency’s ethics and policies: Make sure that your agency has not faced with any ethical and legal issues when performing their functions. Only choose an agency that complies with the federal standards for debt collection.
Only hire a debt collection agency with good experience: The experience of the agency you are considering to hire is very important. Learn how successful it was in recovering debts in the past and how they have been rated by their former clients. Make sure that the agency you are going to hire has a track record of success.
Ask whether you are able to track the collection efforts: Good commercial collection agencies offer easy ways for their clients to track the collection efforts. They also provide you with a way to contact them whenever you’ve a question or you want updates on your case. If you’ve a lot of cases, make sure that you will get online reports whenever you need.
Understand the costs and fees of the agency: Once you have located a commercial collection agency that suits all your requirements, ask regarding their billing policy which may vary between different agencies. Some agencies charge a one-time flat fee while most others take a specific percentage of the collected debts.