The right collection agency can benefit your business. It is important to hire an agency that shares your goals and reflects your style. A collection agency does a great deal more than phone calls and credit reporting.
There are things, however that a collection cannot do.
If you do not have a contract that allows for costs of collection, you cannot expect your collection agency to pass those costs along to the delinquent customer. You want a collection agency that follows the law, always and adding fees without a written contract is simply not in compliance with the law.
You can reduce your costs of collection by taking the time to make sure your customers to agree to pay collection costs in writing in advance of a transaction. If you do not want to take the time to put together a contract, even a simple one, you cannot fault your agency when they tell you they cannot add fees.
A collection agency cannot collect a debt that has been discharged in bankruptcy. or a debt that is so old that the statute of limitations has expired. If you wait years to hire an agency, not only will you pay a higher collection rate, but you also may miss the opportunity to collect it at all.
Trust me, I really hate telling a client I cannot collect a debt. If I cannot collect it, I cannot be paid for collecting it, so I am going to do everything I can to find a way. However, I am a realist and there are things – like the statute of limitations – that I just cannot change. The frustrating part is that most times, the inability to collect or to reduce the cost of collection is entirely preventible.
For creditors, a little planning goes a long way.
There are measures creditors can take that will empower their collection agency to do a better job for them:
- Customer contract that allows (in writing) for collection costs or accrual of interest
- Less delay in sending files to a collection agency. After 90 days, bring in the experts
- Share any information with collection agency that might help them do a better job.
- Stop billing customers once they have been sent for collection. Send any inquiries from customers back to the agency and let them do their job.
- Communicate your collection goals to the agency. If you would like customers back once they have paid their debt, you may want a softer approach to collection. On the other hand, if someone bounces a check on you, or disrespects your business, your agency should know you have cut ties.
If your are unwilling to plan a bit, you cannot fault your collection agency. The fault will belong to you. If you DO take some simple steps to plan and assist your agency, you will be delighted with the results.