Should I Hire a Collection Agency?

Should I hire a Collection AgencyWhether you have a small business, a growing medical practice or a fully established corporation there are going to be times when customers just don't pay. This despite your attempts to talk with them, sending multiple invoices, or even offering alternative payment arrangements.

As "pleasant" or "nice" as we would like to be there comes a time when you have to consider taking a stronger stance to get the debt collected. The question is, where do you draw the line?

One the one hand it's a question of customer relations and your comfort level. Occasionally and otherwise good paying customer will become delinquent. If they were a good customer in the past they have the potential to be a good customer in the future. It's difficult to be assertive if you think you will risk a future relationship. If you are comfortable dealing with customers one on one when it comes to collecting on past invoices you may find that your own efforts will succeed most of the time with patience and perseverance. Funny thing is that some customers pay only after you contact them, perhaps believing that if you don't ask them for the money you don't really care if they are paying slowly.

On the other hand, cash flow is the backbone of every business and when your cash is delayed it can cause problems. Meeting accounts payable and payroll is paramount to keeping your company in good standing. All the patience and perseverance in the world doesn't matter when your customers are taking too long to pay or aren't paying at all. Having a good collection procedure in place will assure that you keep cash flow problems to a minimum and, when that fails, having a collection agency to back you up will assure you get payment.

There are signs, in addition to stalled payments, that your customer doesn't plan to pay the bill including: disputes regarding merchandise not previously raised, a renewed response(s) for documentation, repeated (unfounded) complaints, customer claims bills are always paid 60/90 days out, or failure to commit to a revised payment date / schedule. If you have had any of these warning signs, it's a good bet your customer is suffering from cash flow issues themselves and it's best to take immediate action.

When you have gone through all your internal collection processes and the customer still isn't paying, it's time to consider a collection agency. Some studies indicate that you have a 90% chance of collection within the first 60 days, 50% when it's over 90 days late, and 20% when it's over 180 days. If you wait a year you probably won't get anything. A good rule of thumb is to refer customers who are 91 days late in paying to a collection agency. By moving quickly you'll have a better chance of collecting the debt in full.

Once you've made the decision to hire a collection agency, here are some things to consider:

  • Be sure the collection agency you choose is certified through a creditor's rights organization. This will assure that the strict code of ethics and standards will be followed.
  • Find out if the agency you are considering has experience collecting accounts in your type of business. Some agencies specialize only in medical or judgement collection. Know what type of business your account would be considered and find a good match.
  • Ask about the agency's specific collection practices. Will they be mailing or phoning? What types of scripts do they use when making a call? You may ask to see samples to assure that the company you hire will act professionally.
  • Fees for collections are based upon the amount of the debt, type of debt and the likelihood of being collected. Be sure you understand the fee schedule.
  • A collection agency may or may not have a liaison with an actual attorney. Collection agencies that have an attorney will be able to easily accelerate your collection to litigation if that option becomes necessary saving you valuable time and money.

When you are ready to place your delinquent accounts receivables with a collection agency give us a call or contact us. We'll be happy to review the process with you and start collecting those accounts. <Back to Resource List>

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Nationwide Collections :: P.R. Company 1045 Rt 109 - Lindenhurst, NY 11757 - 877-840-2140