Getting customers to pay is one of a small business’s most challenging—and crucial—tasks. If you can’t collect from customers, you may not have sufficient funds to sustain your business operations. You may consider hiring a debt collection firm to handle your collections as an option. Owners often are unsure where to turn for advice and guidance when faced with an unpaid debt. They often lack the time, resources, or expertise to effectively manage the debt recovery process.
Here, we discuss some tips for selecting the best collection agency for your business.
Insist on Customer Service
The days of bill collectors threatening to break the knees of delinquent debtors have ended. Modern contemporary organizations prioritize early intervention, payment arrangements, and facilitating client payments through multiple channels. Look for a partner who can help you supplement your internal procedure with payment notices early in a debt’s life cycle.
The principle of outstanding customer service involves ensuring that all calls are made from a domestic collection office. Outsourcing is popular in the modern business world, but it should not be used in the collections industry due to the delicate nature of the business-client relationship. Domestic call centers are beneficial for client satisfaction and collection outcomes. Collaborate with a local or national collection agency to prevent debtor complaints.
Consider Size and Location
Collection agencies can be categorized into sizes, from small local agencies to large multinational firms. One size does not fit all, so your OCA should be similar in size and reach to your company.
A small collection provider with strong local connections can efficiently manage your accounts if you’re a small business offering goods or services within your city or region. Conversely, if you sell nationwide or internationally, seek out an agency with relationships and knowledge in the United States and the countries where you do business.
Consider Collection Capabilities of the Agency
The collection capabilities of the agency include assessing the total number of collectors, the type of training they would receive for handling your accounts, the number of accounts handled per collector per month, and the average overall collection rate.
If you have a client who plans to outsource 5,000 retail accounts monthly for under $1,000 each, a three-person team may be unable to handle the accounts effectively. Generally speaking, a good collector working in sync with an advanced computer system could likely manage 500–800 retail cases monthly.
Compare Prices and Fee Structures of Collection Agencies for Small Businesses
Ask about up-front costs, annual charges, and debt placement dues. Neither AMPAC nor Shield charges these fees. Instead, AMPAC and Shield are known for their fair commission structure based on actual recovery. This means you earn your income based upon achieving a result for your customer.
In addition to the commission, agencies charge for services like debtor location, company and business name searches, and legal action if authorized.
Most importantly, ask about how the organization handles the funds it receives on your behalf. It is a legal requirement that all money recovered by a collection agency for small business be deposited into a trust account, keeping it separate from other business funds. This is your money, and you want to ensure it is handled safely.
Availability of Technology
Given the current state and availability of technology, your agency should provide some form of online access that allows you to check your accounts’ progress, communicate with their collectors, and possibly even run statistical reports on your collection portfolio.
If you only make a few claims annually, this may not be a significant concern as long as the collectors regularly update you on the status of each account. But if you have hundreds or thousands of accounts, you should work with an agency offering web access to this data. Their ability to provide customized and ad hoc reports should also be another important consideration.