One of the realities of business is the fact that not all customers would be able to pay in time. While it is possible to wait for a client to have enough funds to pay you, it is not something that you can, and should, do all the time. In cases where your client has been remiss on his or her payment for quite a few months, you might need to get the services of a debt collection agency.
Just like with hiring any other service provider, you have to consider a couple of factors first before choosing which professional debt collector to go for. Here are some of them:
1. Specialization. Although most people think that debt collectors are one and the same, this is not true. There are actually debt collectors that specialize in credit cards, personal loans, and remission of payment. Some debt collectors also focus on small businesses while some may work only with medium as well as multinational corporations. That being the case, make sure that you do your research first so that you can quickly eliminate debt collectors not specializing in your field of work.
2. Legitimacy. Debt collection agencies anywhere in the country would need to have a business permit before they can operate. However, certain states also require a number of other permits, licenses, and certifications before they actually let the agency operate. Make sure that you know what is the requirement in your state and use that to check the legitimacy of the agency you are considering for the job.
3. Skip Tracing System. While most clients are just hard up but are truly willing to pay their debts, there are some who would actually skip on their responsibility. This is especially true if you are dealing directly with a consumer and not another business entity. In order to go after your debtor, you might need to have collector that has a skip tracing system. With this system in place, your debt collector would be able to effectively determine where your debtor is and manage the collection of the payment due.
4. Errors and Omissions Insurance. The strategy that would be used by the collecting agency is typically something that is out of your control. If your debt collection agency happens to be quite aggressive, there is a possibility that your client would sue him or her. So that you would not be held liable, your collection agency must have an Errors and Omissions Insurance in place.
5. Fees and Costs. Most collection agencies either charge a flat fee or have a contingency rate. Your choice would depend on your budget as well as on how much you trust the collection agency. The latter, however, is the more popular choice as it usually espouses a no-collection, no-fee principle. The former, however, is fixed and straightforward regardless of the amount to be collected.
6. Feedback. Make sure that you check with the agency’s previous clients what their experience was like. This could give you an idea how effective they would be in handling your account.
7. Success Rate. Aside from what previous clients have to say about the collection agency, it is also important to take a look at just how successful the agency is when it collection. While you may not be able to collect the whole amount from your clients, your collection agency should be able to get more than half of the amount due.