If you're reading this, it's more than likely because you've done everything you can to get a client to pay, including asking nicely, and they're simply... not paying. You may be wondering if you have any recourse at all and you really, REALLY, need to get back to running your business. Hiring a professional debt collections agency seems complex and a little uncertain. Maybe your only interaction with debt collection was as a consumer and that wasn't a positive experience.
No need to fret. Here are tips to consider when hiring a debt collections agency for your business.
While anyone with a phone may claim to be a debt collector, handling your business clients takes more finesse. The collections company you hire should have experience and even specialize in your industry. Another factor to consider is whether the agency collects both commercial (B2B) and consumer debt. A consumer collection agency is bound by laws and regulations, such as the Fair Debt Collections Practices Act (FDCPA), that don't apply to corporate debt collections. The collections agency should also have experience in the age and type of debt for your company. Ask questions and find out average balance size, average age of debt and the specialized industries of the agency.
Collection agency fees will differ, depending on the type of debt they are collecting. For instance, some agencies may charge a flat fee, no matter the invoice amount. In many cases, corporate collections charges a contingency fee. A contingency fee is a percentage of collections and contingent on the actual amount recovered. Often, with corporate debt, there is no minimum quantity of invoices, as opposed to collecting from consumers. Anything a client owes your company is important for your business and it's important to recover.
Security & Transparency
The security of your client information must be considered when hiring a B2B debt collections agency. When sharing documents and the history of your business relationship, you'll want to know that your customer data is kept private and as secure as if you had it in your own hands. At the same time, the agency must also be willing to provide information on their collections process, including tactics, accurate and regular reports. You should have a contact within the agency that is willing to update you on your account and make the outsourcing process simple.
Licensed & Insured
Every state has its own regulations with regards to licensing and insurance. In some cases, many states require that collections agencies be insured in the state where they are collecting the debts. Insurance is typically required for collection agencies, especially if they are collecting from consumers who are protected under the FDCPA. Both licensing and insurance will reduce the risk to your company throughout the collections process.
Clear Payment Process
The most important outcome of hiring a corporate debt collections agency is getting paid, yes? The right collections agency will offer efficient payment options for your clients, including credit card, check and wire transfers. You'll have a clear understanding of when and how collections are recovered and when your business can expect payment after recovery.
When you work with a commercial debt collections agency, you should expect quality customer service - both to you and your clients. Throughout the process, a single point of contact should be available to answer questions, update you on the status of the account, provide details on the progress of the recovery and inform you when and how much payment to expect. A debt collections agency shouldn't feel disparate from your accounting department but as an extension of it instead.
At Enterprise Recovery, we also offer the option of representing your company to assist with cleaning up your accounts receivable before you have to outsource those invoices fully to a debt collections agency. The recovery rate is higher and typically more money is recovered. You can learn more about this process by reading our previous blog post.
These tips are only a few considerations to help build a solid relationship with a debt collections agency for your company. Most importantly, a level of trust should be established. After all, a corporate debt collections agency would be working with important assets to your business, money and your clients. Keep this in mind as you do research and contact us if you have questions.