Whether you’re running a small business with only a few customers, a large enterprise with multiple divisions and thousands of customers, or you are representing a Local Council recovering debt from rate payers, your decision as to which collection agency to select is an important one. Irrespective of the size and nature of your business, dealing with unpaid debt can be a very time consuming, costly and exhaustive process.
You may already have in-place effective credit risk management strategies including your terms and conditions of trade, automated reminder systems and dispute resolution processes. However, when these internal measures fail to get the debt paid – the resources and expertise of a professional debt collection agency can help you.
But how do you know which debt collector has the skills, experience and resources to manage your debt recovery?
Here are some helpful hints to follow when considering a debt collection agency.
Every debt collection agency has a track record of managing commercial debts from a range of industries as well as different debt types. Some specialise in high-volume consumer debt recovery and others specialise in more complex commercial debt recovery. Regardless of this, you’ll want to work with an agency that understands your industry, the structure of your organisation, and the kind of clients you regularly deal with.
Ask about their process for handling matters in an industry similar to yours, along with the outcomes they’ve achieved. Find out how long they have been in business and who some of their long term clients are in the same market segment as you. Talk to them about the technology they use to support the debt recovery process, and how they intend to report to you regarding the progress of your matters. You’ll also want to know the experience and qualifications of the people actually doing your work.
Some collection agencies simply push your work through an automated phone dialler, often manned by part timers and students. Obviously this will not deliver the best outcome on your portfolio. Some agencies use call centres located outside of Aust
No business wants to be associated with a collection agency that doesn’t follow the rules. So make sure your agency is fully licensed, accredited and insured. In certain states of Australia, it is mandatory that each employee also holds a commercial agents license.
In Australia, all debt collection agencies must adhere to guidelines outlined by the ACCC and ASIC. These guidelines define what they can and cannot do, particularly in relation to consumer debt recovery.
The recovery rate, commission and fee structure will vary from agency to agency and clients to client. The truth is that no agency can guarantee a recovery rate, as many factors impact on the recoverability of a debt.
Most agencies operate on a ‘no win, no fee’ basis, which means you only have to pay commission when the agency recovers the full or partial amount of the debt. You should only pay commission on the amount recovered, not the amount placed for collection. If you need to proceed with legal action, you will incur additional fees, and these should be discussed and agreed with you in advance. Importantly, many of the costs associated with legal action are recoverable from your debtor. Your debt collector can explain which costs are recoverable, and which costs are not.
In addition to reviewing their level of experience and history, you can ask the debt collection agency for a couple of referees to contact. Call them directly for their personal opinion of the agency. Did they have any issues during the process? How long did it take to recover the debt? Would they recommend the agency to you? Was their actioning of the files timely? Were they responsive when dealing with their client? Was the experience as good as the collection agency said it would be?
Speaking directly to referees is always better than reading testimonials on their website, as these may well have been prepared by the company itself.
Are you a business owner and need help with collecting an unpaid invoice?
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