Paying a lower rate for the same auto insurance is a good thing. Paying a lower rate for collections will not only cost you recovery dollars, it will defeat the purpose of cleaning and maintaining your accounts receivable.

Agencies that advertise lower rates and flashy recovery rates are only willing and able to collect the “easy money”. Agencies that work to clear your accounts, and help with your AR, are not only going to have a higher commission rate, but will actually recover more money for you (see comparison below). The bottom line is that a professional agency will provide you not only with a larger check each month, but the assistance you deserve in maintaining your accounts.

Many agencies only collect on accounts they feel are likely to pay, so most of your accounts are closed or deemed uncollectible from the very start. These agencies’ collection efforts are minimal, in order to maximize their profitability. You receive a check and a recovery percentage that sounds great at 40% or 50%. However, these agencies are computing their recovery percentages only on the active accounts. This means that all of the closed, returned, unable to locate, un-collectable and various other classifications are not being used to calculate your recovery percentage. This is a commonly used deceptive practice, but is easy for you to spot. Simply divide the actual collected funds you’ve received into the total dollars you have sent to the agency.

There are four factors that should determine the commission structure. These are:

   1) Age of account(s)
   2) Type of account(s)
   3) Quantity of account(s)
   4) Average dollar amount of account(s)

A professional agency, prior to assigning a commission rate, will be able to understand and calculate the amount of work and cost associated with your accounts. Such a professional agency will take into consideration the depreciation scale of collectability, the industry averages of recoverability, and your specific type of accounts, needs and goals. The agency will then provide you with a rate that is fair and consistent with the required work.

In the collection industry a lower commission rate generally means less work, less service, and most importantly - less money for you.

Commission Comparison

Agency two will not only return more of your money, they will have worked every account with the same vigor and persistence, helped you to clean more of your outstanding accounts, and provided all of your debtors with professional service and fair options in repaying their accounts. You should also receive more reports, updates, and choices to customize your collection program with Agency two.

In summary, select an agency based on your desire to increase your profitability and success. Search through the onslaught of commission rates and numbers and look for the agency that provides you with the information you need to make the best decision for your business.

You can learn more about the basics of debt collection and recovery by visiting our website