Hiring a collections agency can be a tricky matter. From finding the right firm to making sure you’re placing an account with them at the right time, involving a collections agency in your business is serious stuff. As a small business that leases products or offers payment plans for purchasing, you sometimes come across customers who aren’t upholding their end of a contract. A collections agency can help you recover lost payments while you spend valuable time focused on other aspects of the business. Here are tips and tricks for when to hire and who to hire.
When to Hire
When a customer is late making payments, reaching out to them on your own should be your first tactic in recovering the debts. Watch, and actively balance, your small business checking account to keep track of all your invoices and past due accounts. Having records and transactions on file will make it easy for you to determine what accounts need collecting and how far behind the customer is in their payment.
- When an account reaches 90 to 120 days past due. Some businesses place the account with a firm after 60 days, while others wait for a year. The timing is up to you.
- Payment terms fail. In some cases, irresponsible consumers pay only when want to. This group is responsible for 25 to 50 percent of the cost of collections.
- You have tried a number of times to reach the customer with no luck. If they aren’t returning your calls and emails or have disconnected their phone, turn to a collections agency to connect with the customer.
- Complaints become the topic of conversation. If the customer brings new complaints or disputes to the table when you call about collection, they are delaying. It is up to you determine the validity and whether or not a collections agency might be better suited to handle the account.
- Repeated delinquencies occur along with frequent changes of address. A “skip” is a customer who has moved without informing creditors or leaving a forwarding address.
Who to Hire
There are a few things you want to look for when hiring a collections agency. You’ll need to do your research before signing any contracts to make sure both you and the firm are abiding by the proper regulations and are a good fit with one another. Here are things to consider when choosing a collections agency.
- Look for an agency that has experience dealing with similar businesses and similar accounts. You want someone who has proven success in your field.
- Ask about their tactics. Some methods may work for some businesses, but not for others. You also want to make sure their strategies align with your business’s values.
- Check for the geographic licensing and national memberships. Making sure they are nationally accredited and licensed in both you and your customer’s regions can give you more peace of mind.
- Consider the investment. Some agencies charge more for a greater effort. Consider if this long-term partnership with a collections firm is a good investment for your business.
- Get recommendations. Ask the firm for a complete list of clients so you can see what current and previous clients have to say about the agency.
As you look over accounts and recognize some that are far past due, consider bringing in a collections agency so that you can spend more time focused on other important areas of your business. A collections firm can help you recover debts from delinquent customers. It’s up to you to determine the best time to bring an agency in, but if and when you do, make sure the company is a good fit with your business and clients.