Hiring a Collection Agency: How to Get it Right

Posted by Marilyn Miller on February 13, 2019  /   Posted in Uncategorized

Hiring a collection agency might be the best business decision you make all year. If you get it right, you will save time and improve your cash flow. How DO you get it right?

The first thing you need to do is determine your collection goals beyond simply getting paid. Do you want to keep these customers once they have paid, or are you done with them? 

Once you have set your goals, here are some factors to consider:

Experience and personality

How long has the agency been in business and what experience do they have collecting for businesses like yours? How does the agency approach your customers. If your goal is to get people to pay you and then keep them as a customer, you will want a very different approach than you will for customers who you have sworn off ever working with again. An agency may be able to handle both types, but it is important to communicate your goals and determine what appetite, if any the agency has for your business, and your desired approach.

I once won a medical account because the previous agency was refusing to set up payment plans and instead demanding full payment. We came in with a program that out customers on automatic payments, which are simple for all involved, and we were wildly successful.

License and bond

Make sure that the agency has the appropriate business license. Some states also require a separate collection license and bond

Research Capabilities

Half of files submitted to a collection agency need at least some sort of research to find a new address, new phone or other information necessary for collection. In the collection agency, this research is called skip tracing, and it is very important. Ask the agency how they perform their skip tracing. It should always be included in the collection rate your agency charges, and never extra.


Although some collection agencies offer a low flat (non-refundable)rate fee for basic contact, real collection of bad debt is done with a contingency rate. Contingency collection rates are based on aging of the debts placed. With this sort of approach, your agency gets paid only when they get you paid. No collection means no fee.

The lowest rate is not always the best rate. Ask the agency for references,  and ask them to describe how they will work to collect for you. Be very careful, before you sign a contract, that you know what is included in the rate, and what is extra.

Legal Capabilities

Many collection agencies have attorneys on staff, or have a working relationship with attorneys to work on files that need to be referred for legal action. Make sure to understand how the process works, and what extra costs, if any are involved.

Also, ask the agency if they are experienced in post judgment recovery. It is one thing to get a judgment, another to get the money.






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