What should you look for and why we have everything our clients need.

What makes the best collection agency for your business?  A great collection partner maximizes the amount of debt collected and returned to you, be transparent in their methods and reporting, and help maintain a positive relationship with your clients.  With those goals in mind, here are 6 tips to selecting the right collection partner.

1)   Consider total ROI, not just initial price

The collection percentage charged by an agency is just one factor to consider when deciding which partner to choose.  While it may be tempting to compare agencies based solely on that percentage, what’s most important is how much cash they actually put back into your wallet.  Many agencies charge a straight percentage of what they are able to collect, but the results they achieve on the number of accounts they actually collect on vary widely.  A low agency percentage incentivizes work on easy to collect debt and may mean that other debt is ignored.  In fact, a collection agency with a low fee rate and a low collection percentage won’t give as high a return as an agency with a higher fee rate and better recovery rate.  To illustrate this, take a look at this example:

Even though Agency A charges a much lower fee rate, Agency B would still be a better choice because the cash return to the company is higher. When shopping for a collection agency, ask for an industry analysis to compare what type of results they have established  for other companies in your industry.  That knowledge can help you make a decision based on real returns and not perceived expense.

2)   Insist on Customer Service

Gone are the days of menacing bill collectors threatening to break the knee caps of delinquent debtors.  Top modern agencies focus on making it easier for clients to pay through multiple channels, payment plans, and early intervention.  Look for a partner that can help you supplement your in-house process with payment notices early in the life cycle of a debt.

Part of outstanding customer service means ensuring that all calls are made from a domestic collection office.  Outsourcing is common in the modern business world, but should not be used in the collection industry due to the sensitive nature of the relationship between your business and your clients.  Domestic call centers pay dividends in both collection results and customer satisfaction.  Avoid debtor complaints by partnering with a collection agency with a local or national presence.

3)   Find partners, not collectors

Just like a marketing consultant works with a company to create better sales results, a collection agency partner should work with you to develop a system for managing your accounts receivable to increase your bottom line.  Collection Agents are experts at debt recovery, and should work with you to improve your in-house collection efforts.  For example, many collection agencies will help mitigate risk by conducting credit checks on potential customers, or help institute pre-collection measures that send out payment reminders at regular intervals.

4)   Look at their track record

As with any purchasing decision, the best information comes from people who have used their services.  Ask for referrals from organizations or individuals that would know best.  Some good resources to turn to for information include:

Google Reviews or Social Media

Collection laws vary from industry to industry, so it makes sense to find an organization with experience in your specific field.  They will often be better equipped to deal with that industry’s unique challenges and use that information to improve recovery while maintaining a compliance system.

5)   Check for required Licensing

Under collection agency laws in California, agencies are required to have a business license in the city in which they are located. For businesses that deal with in-state clients, a collection agency with a local license is more than satisfactory.  If your business deals nationally, however, you will need a collection agency that’s licensed to practice in all areas where your customers live.

6)   Evaluate Reporting

A common pitfall of many collection agencies is a failure to regularly report collection rates.  You should expect at least a monthly statement and payment on any accounts, and access to an online portal where you can view recovery rates at any time.

The right collection company can do wonders for your cash flow.   Completing a little bit of due diligence before making a final decision will ensure you have a partner that will get you the best results.

Business and Commercial Debt Collection Explained

Understanding Small Business Debt Collection

At some point, every company will encounter a situation where a client doesn’t pay on time, refuses to pay altogether, or can’t afford to pay the full amount for services rendered. While each of these situations is notably frustrating, it’s important that you respond in the appropriate manner. How you respond will not only impact your chances of collecting on the debt, but it’ll also reflect on your brand image.

If you’ve been around for any measure of time, then you likely know that small business debt collection typically involves money owed from customers who fall into one of three categories:

• Customers who will go to any lengths necessary to avoid paying.

• Customers who have lots of payments due at once and pay them off sporadically.

• Customers who normally pay on time, but can’t because of financial issues.

“In general, you will want to ensure that your clients and customers fall into the last two categories,” FindLaw.com explains. “You will be able to manage and work with those that fall into the last two categories because they have a history of making full or partial payments. As a small business owner, however, you need to be able to devise a strategy and method for figuring out which clients and customers fall into the first category.”

It’s also important to recognize that not all debts and delinquent payments are the same. For example, a $250 debt from a long-time client who has never missed a payment is not equal to a $15,000 debt from a new client who has yet to pay you for any services rendered. You can’t take a narrow approach to debt collection. Everything happens on a per-case basis and you must be willing to adapt to the circumstances.

6 Tips for Getting Your Clients to Pay Up

It doesn’t matter if the client is someone you know personally and have a great relationship with or a brand new client that you’re angry with — you have an obligation and a right to collect the money you’re owed. The key is to be strategic in how you approach these situations.

1. Stay Calm

When you’ve provided services for a client and they don’t pay you on time, your natural inclination is to be infuriated (and you have a right to be upset). But it’s imperative that you take a deep breath and stay calm. The angrier you get, the less likely that you’ll collect on the full debt. The client will feel your wrath, will take it personally, and won’t feel like cooperating (at least not in at timely manner).

“Your mental state has a strong impact both on how you handle the debtor and how they respond to you,” collections expert Bob Tharnish says. “Treat each call as if it was your first call of a very good day. Put a smile on your face. If you were irritated on the previous call, take a few minutes to calm yourself and start afresh. The debtor will respond to your tone. Your upbeat mood will be contagious and you are likely to get a more positive response from the debtor.”

2. Know Your Rights

If you don’t have any professional training in accounts receivable or debt collection, then you’re probably blindly fumbling your way through the process of collecting payments. The sooner you educate yourself on your rights and legal options, the better off you’ll be. Not only will you understand the actions that can and can’t be taken, but you’ll also become more confident in your interactions with customers.

For example, did you know that you can legally search for someone’s social security number if that individual is evading your debt collection efforts? While there’s no free online lookup service, you can go through the legal steps to find someone’s social security number so that you can move things along.

3. Document Everything

Few things are as important as documentation in a small business debt collection situation. Should the debt ever lead to a legal battle in court, your ability to point to documentation will be very helpful.

Every time you talk to a client on the phone, record the phone call and take notes. Certify and copy every letter you send in the mail. Save email correspondence. Log visits you make to the client’s office or home. All of this information could prove helpful.

4. Avoid Harassing

There’s nothing helpful about harassing a customer who owes you money. While persistence plays an important role in collecting on a debt, there’s a fine line between checking in and pestering.

Harassing looks like calling a customer every single morning for 60 straight days and screaming at them. Persistence looks like calling every seven to ten days and giving the client some options by which they can start paying off the debt.

5. Offer to Settle for Less

Let’s say a client owes you $10,000 and is 120 days past due. You’ve been trying to collect on this debt for four months and feel pretty sure you’re never going to see the money. Before simply writing the debt off, it’s always a good idea to offer a settlement for less than you’re owed.

While the delinquent payment is stressful to you, rest assured that it’s causing more anxiety for the client. It’s probably keeping them up at night. If you come to them and say you’re willing to take $5,000, they may jump at the chance to get it off their books. And considering that you already counted it as a lost cause, that’s a $5,000 win for you. You’ll never know until you ask!

6. Hire a Collection Agency

If you have a lot of outstanding debt owed to you and you’re spending a lot of time trying to collect on it, it may be worth your time to hire a collection agency. Not only will this save you time and possibly allow for better results, but it could keep you out of legal trouble.

“The Fair Debt Collection Practices Act (FDCPA) became law in 1977, and it governs how debts may be collected,” explains Mike Periu, president of Proximo, LLC. “The law mainly regulates companies that are engaged in the business of collecting debts on behalf of clients or that buy debt at a discount price with the goal of collecting on it.”

Registered debt collection agencies understand the intricacies of the FDCPA and you can avoid putting yourself in a compromising position by working with them.

Learn How to Walk the Line

Debt collection isn’t fun. Sometimes you feel like you’re being a pushover and other times you feel as if you’re being too harsh. The goal should be to walk the line well enough that people take you seriously and pay up when they’re able. You’ll occasionally have to write off bad debt, but follow the aforementioned tips and you’ll have some success.

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How to collect Small Business Debt before hiring us.

Small businesses rely on a healthy flow of income to remain in business—especially since over 50% of new businesses fail within the first five years. For small businesses, a bad debt can mean the difference between profitability and net losses. For a small business, collecting debts can be a difficult and, occasionally, litigious process. There are a number of things you can do to increase your chances of being paid. Read on to find out how to avoid bad debts, manage overdue payments and collect debts.

1

Develop a payment policy. Before you provide any services or goods, contract with your customer so they understand what they are responsible for paying and when. Make sure all document language is clear. Discuss the account with the customer so you can be sure they are familiar with any charged amounts and due dates. Payment terms need to be agreed on by both parties.

• Consider adopting a late payment fee to encourage on-time payments. You may choose to charge a percentage of the total bill when payments become delinquent—2% is typical. Make sure all late fee policies are included in your contract or payment policy.
• You may prefer to ask for at least 50% of payment upfront. This ensures you at least receive something in exchange for your time and efforts.
• Do research about collecting interest. Federal and state laws regulate the collection of interest on debts. Always make sure that any interest you charge is lawful and included in your payment policy to avoid debt forfeiture or a fine. You can check usa.gov for your state's usury laws.
• You can also check your state's attorney general website for information on legal interest rates and legal practices in your state.

2

List the due date on every bill you send. Some invoices state, "payment due upon receipt." You may also use "net 15 days," "net 30 days" or any other period of time in which you expect someone to remit payment.

• Placing a due date on a bill encourages your customer to include it in a current or upcoming billing cycle. If you do not place a due date on the bill, the business or individual may wait a month or two before paying, especially if bills are tight.
• Don't wait 30 days from the date of service or delivery of the product to send out a bill. Bill every 15 to 30 days. The sooner you send out the bill, the more likely you will get paid sooner.

3

Send reminder bills. When a payment becomes past due, immediately send a reminder noting the amount owed as well as the fact that payment is now past due. Many customers are so busy that they simply forget a bill hasn’t been paid. They will often pay it as soon as they realize payment is past due.

• Keep a record of all contact with the debtor. You will need the dates and times of your calls, letters and any other communication about the late payment, in case of legal action. You may also need to address this information when you contact the debtor.

4

Keep a contact with each company or customer. Make sure you have relevant contact information, such as address, telephone number and extension number, if available.It is also good to check in with your business contacts regularly. Engaged business relationships promote a mutual desire to fulfill transactions.

• Address each bill directly to the person who makes financial decisions in a business or the person responsible for the account.
• If you don’t have a contact for a business transaction, you can usually call the front desk and be connected to Accounts Payable.

5

Create a procedure for dealing with debts. You will need to decide what happens when payments are late. Generally, you first send out a reminder, then call the customer or business that is late with a payment, follow up, try to negotiate and then take it to collections or pursue legal action if the debt remains unpaid. Everyone in your company should understand the process so they know where to direct those who owe debts when they reach out to you.