Collection Agency: How to Get the Best Results

Posted by Marilyn Miller on September 21, 2021  /   Posted in Uncategorized

If you have hired a collection agency, congratulations! You have taken an important step towards improving cash flow and saving time and effort. In order to get the best results, however, you must work closely with the collection agency.

Effective communication with the agency is key.

You should expect your collection agency to keep you apprised of their progress. They will primarily do so with monthly reports to you. You also have a responsibility to communicate any new information to your agency. If you receive a payment in your office, let the agency know immediately. If you learn any new information about customers in collection agency – address, phone, job – anything, pass it along. Research is a big part of debt collection and new information is precious to an agency. 

Also, advise your agency if there are customers in collections that you would take back once their debt is paid. They may be able to use that information and the promise of redeeming their relationship with you to get you paid.

Stop billing the customer, and stop providing service.

It is important that customers in collections see you and your agency as one united front. If someone wants to pay you, take the money. However, if they want to argue about the bill, set up a payment plan, or if they beg and plead to be taken out of collections, send them back to your agency. I always tell my customers, “Take the payments, but do not take the issues.”  Your hire your agency to resolve disputes and set up and execute payment plans, so let them take the heat.

Do not be surprised if customers sent to collections – the very same customers who have avoided you for months – call you and promise you a future payment to avoid “being in collections”. Unless they make an immediate payment, stick to your guns and refer them back to your agency. Your agency’s efforts – even if it was just one call – made them come to the table. Plus, every single time I have seen this happen – the customer has made a couple of payments and defaulted. Then the customer winds up back in collections – except that now I charge a higher rate!

As much as possible, stop providing product or service to customers in collections. I once was attempting to collect a $ 5,000 bill for a doctor. The debt resulted from treatment for injuries resulting from a car accident, and the case was in litigation. Often physicians will accept a lien or letter of protection which “protects” the bill and promises payment when the case settles. Attorneys are often involved in these cases, and can provide letters of protection only if their clients agrees. In this case, the debtor refused to agree to lien her settlement, because she “needed the money to move”. She also refused to pay anything towards her balance. I called my client to discuss her case, and they informed me that they were currently treating her for another injury and that she had already racked up a $2.000.00 bill. This patient was effectively getting more “free” service from the doctor, and was therefore unlikely to take any demands for payment seriously.

Also, stop billing the customer. Your collection agency should send regular notice, and customers who hear from two different sources may either get confused or believe that you and your agency are not working in unison, and exploit that fact.

Rate of return is everything

Collection agencies generally work on a contingent basis. They do not charge you any fee up front and are compensated with a percentage of sums recovered. While the contingent rate they charge you is important, the true measure of success  is how much they actually recover. Some agencies will offer what will seem like an attractive rate when in actuality it is a rate priced to do only a limited collection effort.  Monitor the actual rate of return you receive from your agency. If you are receiving less than a 25% rate of return (15% is the national average), then consider finding a new agency. 

Let your collection agency do what you hired them to do, and treat them as you would any other trusted business partner. Expect results but assist in the process. You will be glad you did.

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