A collection agency that works hard to recover money for you can be a valuable business partner and save you time and money.
However in order to get the best results, assist your collection agency by providing with the information they need. Also, once you have submitted a file to a collection agency, get out the way! Let them do their thing. Stop billing the customer, and direct them to the agency if they make contact.
Success in working with a collection depends will also depend on what you are trying to accomplish. Believe it or not, getting paid is not always the goal of business owners when they submit a file to us.
Here are the best and worst reasons to hire a collection agency.
Best: Improve your cash flow
More money in your business means that you can pay your bills on time, give employees a raise, buy new equipment, or start new marketing campaigns.
Best: Save time
Less time spent chasing non-paying customers means more time to focus on running and growing your business.
We get it. When customers do not pay you, it makes you angry. However, if you are simply using a collection agency to “get back” or “harass” your customers, you are missing the mark. Periodically I get a call from a prospective customer who will tell me, “I don’t care about the money, just make his life miserable and ruin his credit”. I politely decline.
Worst: Cheapest rate
A collection agency works on a contingency basis, which means that they do not get paid any money up front, but retain a percentage of money. Rates can vary based on a number of factors: age or nature of the debt being the most common. A low rate is great, because it could lower your overall cost of collection. However, not all low rates are collected equal? What is included in the rate? Be careful of hidden fees for services such as research.
Focus on obtaining the best rate, not the cheapest one.
Best: Avoid drama
Let your collection agency deal with issues. Collection agency staff can not only handle disputes, but can set up payment plans with your customers, and make sure these plans stay on track.
All in all, hiring a collection agency will be one of the best decisions you make. Just make sure you are doing it for the right reasons.