How To Select A
Debt Collection Agency
When your invoices are being ignored, you may need the services of a debt collection agency.
Intercol offers insight on selecting the best collection agency to collect your accounts receivable, past due accounts and bad debt.
Bad debt can reduce a business's or medical practice's cash flow very quickly. Unpaid accounts receivable can harm the bottom line of all businesses, and smaller businesses are particularly at risk as expending resources to attempt to collect the money can be both a financial and physical drain.
To recover the money that is owed to them, many businesses or medical practices turn to a professional collection agencies. Collection agencies specialize in recovering payment from past due accounts. Collection Agency Information was created to offer you the information you must know before hiring collection agencies.
How Collection Agencies Operate:
Collection agencies can attempt to collect on bad debts in two ways:
1] By A Collection Demand Letter Then Phone Calls
Many collection agencies will typically send a collection letter and then progress to more expensive phone calls to the debtors.
2] By Collection Demand Letters and Phone Demands In Phases
Other collection agencies will start out with a serious of collections letters, then progress to a more intensive phone collection if the debtor does not respond to the collection demand letters.
Choosing A Collection Agency Service
Choosing collection agencies can be difficult at best, because it's hard to predict the collection agencies collection rate. Following are a few areas to consider when choosing a collection agency service:
> What Is The Collection Agencies Method of Collections?
You should examine the collection agency letters that will be sent out on behalf of your business or practice, and decide if they will be effective with your debtors. You should also ask about the training that telephone collectors receive to ensure they understand the Fair Debt Collection Practices Act and other collections laws.
> How Do You Communicate With The Collections Agency?
Be sure to find out:
1] How the information on your delinquent accounts will be sent to the collection agency. Is it via mail, fax or online?
2] When the collected funds will be forwarded to you from the collection agency. Is it directly from the debtors? Is it monthly, etc...?
3] What reporting capabilities does the collection agency provide? Do you get online reporting detailing the collection progress, success rates and other metrics?
4] How can you the stop collections process if you receive payment, credit an account or get returned merchandise. Does the collection agency charge you for this?
> Does The Collection Agency Offer Skip Tracing?
Skip tracing can be important when collecting from consumers. Skip tracing is the process of locating debtors who have moved with no forwarding information. Collection agencies should be able to use available databases to attempt to locate these debtors. Does your prospective collection agency offer this service?
> Before Hiring Collection Agencies Information
There are some time tested, best practices you can implement to reduce the amount of money owed to you before transmitting your past due accounts to a collection agency.
1) Do Your Homework Before Offering Credit
If practical, check the credit references of each new account and don't extend more credit than your business can handle. This will reduce the amount of account that are sent to collection agencies.
2) Explain Payment Terms Explicitly
When you decide to extend credit, make certain that your customers know exactly when you expect payment, and clearly detail any credits or penalties for early or late payment. This will help the collection agency if they wind up with an account.
3) Systematically Follow Up On Past Due Accounts
Do not expect your customers to supervise themselves; instead - promptly re-invoice, send statements and reminders of payment due dates. Take the guesswork out of your customer's hands. This can help prevent accounts from reaching the collection agency.
4) Create A System Of Past Due Account Follow-up
You should create a systematic follow up of regular written and oral payment reminders before even considering collection agencies. This will not only help you save on the collection agencies fees, but will also help avoid harming your reputation if you decide to use an aggressive collection agency.
5) Set An Absolute Final Due Date
This is the endgame in your internal collections process. You must set an absolute due date before the account is turned over to collection agencies. Never extend this date, and give the debtor fair warning of this final payment date. Let the debtor know in no uncertain terms that the you will be turning him over to a collection agency if they do not pay up now.
Collection Agencies Information - Costs & Pricing
Debt collection agencies usually charge on a contingency basis. This means that collection agencies keeps a percentage of money that is collected from a debtor. Depending on the size of the business, the volume of accounts, the dollar amount of the accounts and age of the accounts, average collection agency's commissions can range from 25% to 50% of the collected amount.
Other collection agencies charge a flat fee.
Instead if paying a high percentage that is often larger than the profit margin on the sale in the first place - these flat fee agencies can actually keep you profitable on a collection account.
We hope this collection agencies information has helped you on your quest to collection your money.
Contact us for any debt collection case using our placement form.
