Collection Agencies aren't just third-party contractors. They're business partners that help companies deal with delinquent accounts while maintaining a positive relationship with customers. The right collection agency has the training, tools, and skills to recover the maximum amount of debt and increase a company's bottom line. The wrong collection agency, however, can be like a bad employee, costing the company precious time, money, and resources. When choosing a collection services provider, here are a few key things you should keep in mind.
1. Return on Investment
Just as there are onboarding costs involved in hiring a new employee, there are initial fees involved in working with a collection agency. When choosing an agency, it's important to consider the total return on investment, not just the initial cost. Even though one agency may charge a lower fee, their collection rates may be low as well. Alternatively, a collection agency with high initial fees may have higher rates of return.
2. Customer Service
Since your collection agency will be negotiating with customers on your behalf, you'll want to ensure the agency is providing the highest level of customer service. A collection agency that uses unethical methods to collect debt can cause damage to your reputation and cost you prospective customers. All collection agencies must comply with the Fair Debt Collection Practices Act (FDCPA) when collecting debt. Being familiar with this law will help you chose a reputable collection agency.
Keep in mind that your collection agency will be representing your company, so you want to choose a provider that feels like an extension of your team. The agency should have knowledge of your industry and any state or federal laws governing your field. Agencies specializing in healthcare, for example, should be well versed in medical terminology, insurance requirements, and important laws like the Health Insurance Portability and Accountability Act (HIPAA).
Many states require collection agencies to be licensed. If your business deals with local clients, an agency with a local license is sufficient. If you operate a national business, however, the collection agency you choose must be licensed to practice in all of the places where your clients live. Before selecting a collection agency, find out what your state laws require.
5. Track Record
Just as you would hesitate to hire an applicant who had a less-than-stellar employment record, you should be wary of collection agencies that don't have established track records. Doing a little due diligence will help you determine how the agency has performed in the past and whether there have been any complaints about their service.
The right collection agency can help improve your cash flow and free up resources that can be redirected to other areas of the business. Keeping the above points in mind when selecting an agency will ensure you hire the best collection partner for your company's needs.