It’s a good idea to have a collection policy in place so that when an account should go to collections you are prepared.
If there is a firm date for writing the account off (whether it be 60 days, 90 days or 120 days), you or your accounting department will be more proactive in asking for payment, and ultimately more efficient in sending accounts to collections on a consistent and regular basis.
Finding a collection agency is similar to finding a lawyer. Ask your friends or family members for references, but be sure that you select a Better Business Bureau (BBB) certified collection agency and one that is bonded through their associations and members of the IACC (International Association of Commercial Collectors) and CLLA (Commercial Law League Association). In addition, it’s critical when hiring a debt collection agency to be sure they are fully licensed if you want to actually get paid.
A collection agency law center is the new millennium system of collecting bad debts; a collection agency led by an in-house licensed attorney and legal team. They will have the ability to send a private investigator to visit the customer and ask for the money in person, thereby giving you a bird’s eye view of the condition of your customer’s business at the time of the visit. This gives you an accurate perspective as to your chances of getting paid based on whether there are visible assets, thereby determining if litigation fees are cost effective.
If recovery through collection efforts alone are not successful, they may recommend a lawsuit should there be sufficient assets involved and a large enough account. Should you decide to file a lawsuit, the agency personnel will do the work and you will be asked to advance court costs and attorney fees. The suit will be brought into a court higher than the small claims court.
In addition to the accreditations mentioned in the collection agency section above, a collection attorney should be accredited through the CLLA (Commercial Law League of America).
Most collection agencies work on a contingency which means that they won’t charge anything unless they collect. The fees are generally anywhere from 25-50%, depending on the age of the account and if the account is retail or commercial.
Agencies are able to collect for you by using mail, email, and professional telephone procedures. Worthwhile agencies will also be able to skip-trace and report unrecoverable debt to the credit bureaus.
In the digital age we live in, choosing an agency that is mindful of your reputation and business relationships is key as well. The goal of a third party agency should be to preserve the relationship between creditor and debtor whenever possible while being aware that this is not always attainable and are fully capable of handling your claim more aggressively, if warranted, by a debtor who is not cooperating toward resolution or continuing a relationship is not of interest to you.