Collection Agency: Necessary Evil?

Posted by Marilyn Miller on January 20, 2020  /   Posted in Uncategorized

For nearly 15 years, I have helped run a collection agency and focused on helping small businesses recover bad debt. I have no interest in large commercial debt portfolio buying. I want to speak with my clients and understand their business needs. I have made mistakes, but each mistake has resulted in a positive change.

Is a collection agency a necessary evil?

Perhaps, but the collection agency is not responsible for the fact that the debt exists. The agency is there to help recover money. Hiring a collection agency with a positive outlook will always get better results.

There are, of course, times when the relationship between and agency and company fails but I believe that any problems are avoidable and stem from three factors.

The first factor is a misfit between the creditor and its agency.

A company that hires an agency that either lacks the skills or the desire to collect files in a way that works for their business. Also, the company could be using a collection agency when a different method of recovering money would be more appropriate. For example, since most agencies work on a contingency fee basis, some businesses will hire a collection agency to collect a large complex litigation that needs to be litigated. Collection agencies can and do handle complex, large collections but choosing them solely to avoid paying an attorney retainer could be counterproductive. We get it. Paying money upfront when you are already owed money stinks. However, like in any other business relationship, it is important to hire someone who is good at doing what you want them to do. Balancing the right collection partner with managing the cost of collection is not easy, but it is critical to success.

Similarly, selecting a collection agency solely based on the lowest contingency fee is a mistake. What services are included in the fee? Are there any additional costs? How long does the agency actively work the file? Does the agency have experience with your type of business and can they provide references?

The second factor that could cause problems is lack of respect.

A collection agency must be respectful of their customers business and perform their services in a professional manner – always. A business must work with their agency to provide all the information they have. If you know there is a problem with a file, and do not disclose the issue beforehand, your agency may feel that you are wasting their time. Remember, just because you pay no fee upfront does not make it free. Your agency is doing work on your behalf because they believe their actions will bring a mutually beneficial result, so it is important that you are committed to the process as well.

Lastly, poor communication can doom any business relationship, but it is particularly important with bad debt collection.

Both sides need to clearly communicate their goals, and the agency should provide regular updates on their progress.
Like any other relationship, it all comes down to both sides working together for a desired result. Starting the relationship not with regret and anger but with respect and openness means you are both likely to benefit in both the short and long term.

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