Hiring a debt collection agency could be a great move for your small business. But how do you know if you are hiring the right agency for your needs?
Here are 5 key things you should look for before you hire a debt collection agency:
1. Licensing, bonding and reputation – For the collection of consumer debt, state laws vary as to requirements for licensing and bonding. Make sure you know what your state requires before you begin your search. For the collection of commercial (business-to-business) debt, a license is usually not required. For any type of firm, you should check their online presence and ask for references.
2. Fees – Collection agencies are paid in one of two ways: flat fee or contingency. Each method has its pros and cons, depending on your business. The lowest fee is not always the best fee. What will the agency do for the fee they charge you, and do you believe that will be sufficient to get results for you?
3. Research – People move around a great deal these days and the ability (and willingness) of an agency to find people and their assets is key to success.
Ask a debt collection agency what sorts of research tools they have. Never pay an additional fee for research. It should be part of any collection compensation plan.
4. Credit bureau reporting – As we have stated before, we believe credit bureau reporting has its benefits and risks, and you should know about both before you start working with a collection agency. Reporting a debt to credit bureaus is only part of the process. What will the collection agency actually do to reach out to your customers and convince them to pay?
5. Personality – Do your collection goals and your company personality fit with the agency? How will they represent you to your customers? Do they have experience working with companies like yours and can they provide references? Know your goals and communicate them to the agency.