Pittsburgh Business Times
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Pittsburgh Business Times January 2002
Collection agency may be the answer if those unpaid bills keep piling up
Choose agency based on more than just price. Mie-Yun Lee
Do you have a growing pile of unpaid invoices that you can't seem to find the time to tackle?
Or do you think you and your staff are becoming less than successful at getting people to pay? A collection agency can be the ideal way to turn that paper into actual dollars.
Collection agencies offer several advantages over internal collections efforts. First, these businesses specialize in collecting payment, which means the established ones are probably better at doing so than most companies.
Choosing the right collection agency should not be a matter of price alone. Most agencies work on a contingency basis in which they are not paid unless a payment is actually collected. This fee can range as high as 50 percent of the total invoice, with higher fees typically found with collections lawyers. While you may be tempted to simply work with the company that offers the lowest fee, it can be a shortsighted way to compare agencies.
Instead, focus on how well the collection agency is able to do its job. Learn what percentage of a client's total outstanding invoices it is typically able to recover. Also, work with an agency that will deal with your customers in a manner that is consistent with your operating philosophy. If you intend to keep your customers after they are sent through the collections process, you will need to identify an agency that treats them as you would. See if you can get copies of letters or transcripts that are used so you can assess whether it meshes with how you would approach the client.
Any agency you consider should be bonded and be able to demonstrate its financial stability. Look for an agency with multiple senior collectors who have five to 10 years of experience. At minimum, all staff members should be well versed in the Fair Debt Collection Practices Act and adhere to it religiously.
Unlike many other outsourced services, you should expect regular and ongoing communications with your collection agency. Since the agency should ideally function as an extension of your finance department, it can also be very helpful to work with one that is willing to adapt its practices to integrate with yours more effectively.
In the end, you may wish to take advantage of an agency, if it proves it can show you the money.
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