subject: 5 Useful Tips For Choosing The Right Debt Collection Agency [print this page] Timely debt collection is crucial to the success of your business.
If you have tried all the conventional methods but are still struggling to get your customers to settle their accounts, you may need to look at outsourcing the collection of such debts to collection agency.
Choosing the right debt collection agency will be easier and more effective if you consider these five useful tips.
1. Licensed Agency
You must ensure that the agency you outsource your unpaid debt to is appropriately licensed. There are stringent licensing obligations (that vary from State to State). All debt collection agencies must hold the appropriate licence.
The licensing laws impose certain obligations on licensees and set out grounds on which the relevant licensing authority can refuse to grant or cancel a licence. This regime helps govern and monitor all agencies performing debt collection services.
2. Fee Structure
There are many variations of fee structures for debt collection within the industry.
A cost effective industry fee structure is one where a debt collection agency charges on a 'no collection no commission' basis. In this case, you would not be out of pocket anything unless the debt had been paid. Only once the debt is paid, would a commission be payable to the debt collection agency. If the original debt is recovered, no commission is payable to CCA. It is therefore in the collection agency's best interest to ensure your debt is recovered successfully.
Each agency may charge a different commission on moneys collected. You should take this all into account before selecting a debt collection agency.
Whichever fee structure you decide on make sure everything is in writing before giving the go ahead for the service and ensure there are no hidden costs or lock in contracts (which may attract termination fees).
3. Agreement
Read the agreement (or terms and conditions) thoroughly and yes, that includes the fine print. Make sure you understand the Terms and Conditions before signing any document as these will govern the terms of the arrangement between you and the debt collection agency. Get advice if you're not clear on the terminology or ask as many questions as you need to put your mind at rest.
4. Experience Within Your Industry
Although you will find the larger agencies have clients from a variety of industries it is always better to go with a company that knows your business and has experience within your industry or at least understands your organisation's structure and policies and maintains the sufficient expertise.
5. Professional profile
As a further reassurance check that the agency has a professional profile that you are comfortable with, as they are in a way, an extension of your business or certainly represent your business in their dealings with your customers.
Summary
Letting bad debt accumulate without putting steps in place to try and recover the debt is not good for cash flow and can adversely effect the successful operation of your business.
Taking a few precautions and outsourcing your debt to the correct agency can save headaches and time down the track. This allows you to focus on what you do best. After all, the whole idea of using debt collectors is to get your outstanding accounts paid.
