Dealing With A Collection Agency
Step I - Selecting A Collection Agency
Selecting a credit collection agency is perhaps the most important and difficult task. Some factors you must consider while selecting a collection agency are:
- Experience and professionals
- Geographical presence
- Expertise
- Fees and charging model
- Customer references
- Collection Agency Services has covered this topic in depth through various free collections reports and articles on this site.
Step II - Hiring the Collection Agency and Setting Up Processes
Once you select the collection agency, the first two steps you have to take are:
Enter into a contract with the agency;
Set up processes on how you are going to communicate with the agency.
A contract is the legal document and your legal experts will, of course, prepare it correctly. Just make sure that you include important clauses such as confidentiality and non-disclosure. You are likely to pass sensitive information to the collection agency such as your account receivables, customer contacts, product and services pricing, etc. to facilitate faster debt collection. You want to be sure that this information does not fall in the wrong hands.
Setting up processes is a very important step in dealing with the collection agency. The success or failure of your partnership will depend a lot on how well-defined your processes are and how strictly they are followed. Important processes you need to define are:
Internal processes: You have to put in place a clear process on defining bad debt and referring the case to the collection agency. You don't want to refer the case to the collection agency before you make a sincere effort to collect the dues internally.
Information transfer: How will you transfer the information to the collection agency about your dues and defaulting customers, and how will you receive the information from your collection agency? Debt collection software can make the information transfer process easy and secured.
Third party dealing: As mentioned earlier, it is very important for you to ensure the security of the information you give to the collection agency. The collection agency may use one or more of its associated agencies to get information about defaulting customers. Hence you need to set up a clear protocol on how much information they can share with such third parties.
Communication: You need to set up single point contacts for communication within the company and the collection agency. In debt collection practices, the timing of communication is extremely important and hence it will go a long way in deciding the success of your debt collection process. Again, the importance of debt collection software cannot be overemphasized here.
Step III - Performance Monitoring
Once all processes are set, start monitoring the performance of the collection agency. This is an ongoing process when dealing with a collection agency. Important parameters to monitor are:
Quantitative
- Number of cases referred to the credit collection agency and percentage of cases successfully solved by them.
- Percentage of debt recovered by the collection agency from all cases referred.
- Percentage of debt recovered by the collection agency from solved cases.
- Percentage of amount paid as fees/commission to the collection agency to the total bad debt cases referred to them.
- Average number of days taken by the collection agency for full/partial credit collection.
Qualitative
* How well do the collection agency professionals deal with your customers?
* Has the collection agency followed all legal requirements mentioned in the Fair Debt Collection Practices Act?
* Has the collection agency gone beyond the provisions of the Fair Debt Collection Practices Act?
* Has the collection agency followed all processes and guidelines set by you?
Step IV - Contract Closure
Hopefully, the selected collection agency will work best for you. But if it doesn't, then you need to transfer all your debt collection processes from the agency. You should remember the following important points when you are ending the contract:
Confidentiality and non-disclosure clauses are applicable even after the end of the contract with the collection agency as well as its employees. The collection agency returns all documents related to your business and destroys all information related to your business from their data storage.
Following these simple guidelines will ensure that when dealing with a collection agency that it works best for you and your bad debts are minimized.
Collection Agency Services offers you a wealth of information on how to select the best collection agency for your business.
http://www.collectionagencyservices.net
MORE RESOURCES:
 Reuters | Washington Mutual stock down on credit concerns Reuters - Citing the thrift's financial statements for the period ending June 30, Gimme Credit analyst Kathleen Shanley wrote that "many creditors have quietly been ... WaMu Drops Second Day as Gimme Credit Cites Liquidity Concern UPDATE: WaMu's Stock Down As Investor Confidence Drains WaMu spokesman: no need to rely on outside funding sources |
FCStone Group increases size of credit facilities Forbes, NY - AP 07.24.08, 3:55 PM ET FCStone Group Inc., a commodity risk management firm, said Thursday it has reached deals to increase the size of its credit ... FCStone increases credit lines Kansas City Business Journal FCStone Group, Inc. Announces Syndicated Margin Call Credit ... |
 The Associated Press | Credit Suisse's quarterly profit falls 62% MarketWatch - By Simon Kennedy, MarketWatch LONDON (MarketWatch) -- Credit Suisse reported Thursday a 62% drop in net profit for the second quarter, but this still far ... Credit Suisse posts smaller-than-expected fall in earnings |
Credit-card firms investigate fraud at Canadian airport kiosks Computerworld, MA - By Jaikumar Vijayan July 24, 2008 (Computerworld) Low-cost Canadian airline WestJet has temporarily stopped the practice of allowing customers to use credit ... Does using your credit card to check-in expose you to fraud? Expert says it's not surprising airport kiosks possibly targeted ... Credit card fraud at Pearson International Aiport has people worried |
New state law ties amount of tax credit with the level of ... Newsday, NY - The legislation caps redevelopment tax credits and increases incentives for the cleanup of affected areas. While the Brownfield Cleanup Program was created ... |
Cicero gas station reports attempt to disrupt credit card system Chicago Tribune, United States - An operator of a Cicero gas station called police Tuesday after finding that two men had climbed the roof of the business to cover up a credit card ... Rooftop gas theft scheme foiled |
 Wall Street Journal Blogs | Extra! Extra! Credit Concerns at New York Times! Wall Street Journal Blogs, NY - The NYT front page does not include a story about its credit default swaps. (nytimes.com) Shares of New York Times Co. are down 4%, but the newspaper ... Extra, Extra: New York Times (NYT) About To Get Downgraded To "Junk" |
Executive says bank has more than enough capital to endure credit ... MarketWatch - The company has been one of the harder-hit banks during the credit storm, but analysts said it has effectively boosted its capital reserves to protect ... |
 Sify | Unsolicited credit card is no more your headache Sify, India - Had a bad credit card experience? Help is at hand. On Thursday, the Reserve Bank of India cracked the whip on credit card issuers by setting out some ... Credit cards get RBI boost RBI warns banks on credit card interest charges Stop excessive credit card charges: RBI |
 India Infoline.com | Asian Stocks Fall on Credit Concern; National Australia Slumps Bloomberg - ``Investors are out there thinking everything's fine and another bank comes out and increases its provision for credit-related losses. ... Asian Stocks Fall Most in Six Weeks on Credit, Profit Concerns Asian Stocks Fall on Credit Concern; National Australia Slumps Asian Stocks Gain for Fourth Day on Easing Oil, Credit Concerns |
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