Have you gotten stuck with an unpaid invoice lately? Many small business owners have. What used to be an exception, now seems to have become more of a rule.
What should you do?
Fueled by a troubled economy, increased accounts receivables from debtors, and reduced staff, many businesses are now turning to professional collection services. With more and more shady agencies popping up due to the demand, you must be cautious about who you bring on as a partner.
Tony Reisz, CEO of Ontario Systems – the preferred technology partner for nine of the 10 largest collection agencies – is educating business owners on what to look for when hiring a collections agency. Here are five things he feels are important to consider:
1. Reputation – No company wants to be involved in shady collections practices, so check the agency’s credibility with the Better Business Bureau, Secretary of State, etc. While the agency itself will face the consequences if they are not compliant, your name can easily be tied to the violation. Some agencies even utilize advanced technology with compliance and best practices built-in, ensuring their representatives can’t violate your customers’ rights while collecting debt.
2. Recovery Rate – Understand the collection company’s recovery percentages and rates. Remember that the commission rate by itself is meaningless – net return is the key.
3. Industry Experience – This may seem obvious, but an agency working mostly in student loan collections may not be the best choice if you’re in the medical collections industry. Experience is often a good indication of quality.
4. Costs – Be sure to balance the commission charged with the agency’s success rate. Carefully consider and evaluate how an agency will reduce your costs, while improving efficiency.
5. References – Check references, particularly from clients that are in a similar business. Call the references and ask their opinion of the collection services, if they have had any problems, and what their typical success rate is.
Use these points to guide your choice of collection agency should you need to go that route. Thankfully, I have never needed to hire a collection agency. What about you?
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A collection agency is going to take a big cut of everything they collect. Before resorting to that approach, have you exhausted internal collection options? Have you reached out to your past due customers regularly and persistently? Have you tried reaching them via email, sms/text and phone? Our service at http://www.PayMePlz.com helps small business owners automate these collection activities.
Thanks Paul. Yes, it’s a good idea to exhaust the standard methods first, but you will get to the point of diminishing returns. Glad to be aware of the service your company offers.